FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 1998
OR
/_/ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission File No. 1-11873
K2 DESIGN, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-3886065
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number
30 Broad Street, 16th Floor
New York, New York 10004
(Address of principal executive offices)
Issuer's telephone number: (212) 301-8800
Check whether the issuer (1) filed all reports required by Section 13 or
15(d) of the Exchange Act 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:
CLASS OUTSTANDING AT JULY 31, 1998
Common stock, par value $.01 per share 3,680,671
Common stock redeemable purchase warrants 1,000,000
Transitional Small Business Disclosure Format (check one):
Yes /_/ No /X/
K2 DESIGN, INC. AND SUBSIDIARY
INDEX
Page
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheet - June 30, 1998
(unaudited)........................................................3
Consolidated statements of operations - three
and six months ended June 30, 1998 (unaudited)
and June 30, 1997 (unaudited)......................................4
Consolidated statements of cash flows - six months
ended June 30, 1998 (unaudited) and June 30, 1997
(unaudited) .......................................................5
Notes to consolidated financial statements
(unaudited)........................................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................8
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds......................
Item 6. Exhibits and Reports on Form 8-K.............................12
SIGNATURES...................................................................12
-2-
K2 DESIGN, INC. AND SUBSIDIARY
------------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
ASSETS June 30,
1998
---------------
(unaudited)
Current Assets:
Cash $4,012,040
Accounts receivable, net of allowance for doubtful accounts of $118,500 1,167,491
Prepaid expenses and other current assets 603,152
-----------------
Total current assets 5,782,683
Investment in restricted securities 3,000,000
Equipment and leasehold improvements 793,056
Restricted cash 150,711
Other assets 9,372
-----------------
Total assets $9,735,822
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligations $ 44,740
Accounts payable 820,302
Accrued compensation and payroll taxes 74,475
Other accrued expenses 1,830,454
Deferred revenue 103,542
Customer advances 37,000
-----------------
Total current liabilities 2,910,513
Long-term capital lease obligations 19,365
Stockholders' equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized; 0 shares issued and 0
outstanding
Common stock , $0.01 par value, 9,000,000 shares authorized; 36,807
3,680,671 shares issued and outstanding
Treasury Stock (75,266)
Additional paid-in capital 6,400,581
Retained Earnings 443,822
-----------------
Total stockholders' equity 6,805,944
-----------------
Total liabilities and stockholders' equity $9,735,822
=================
-3-
K2 DESIGN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
---------------------------------------- --------------------------------------
(unaudited) (unaudited)
Revenues $1,895,232 $1,097,373 $4,035,614 $2,747,476
Direct salaries and costs 1,202,492 834,567 2,668,093 2,021,341
Selling, general and administrative 686,894 583,331 1,221,114 1,228,497
expenses
Depreciation 88,271 60,426 177,279 115,706
------------------- ----------------- ------------------ ----------------
Loss from continuing operations before (82,425) (380,951) (30,872) (618,068)
interest and other income, net, income
taxes and discontinued operations
Interest and other income, net 21,378 31,490 58,984 68,875
------------------- ----------------- ------------------ ----------------
Income (loss) before income tax provision (61,047) (349,461) 28,112 (549,193)
and discontinued operations
Provision for income taxes 0 3,920 2,437 4,956
------------------- ----------------- ------------------ ----------------
Income (loss) from continuing operations ($61,047) ($353,381) $25,675 ($554,149)
Loss from discontinued operations (36,504) (119,962) (85,309) (247,050)
Gain from sale of discontinued operations 3,102,123 0 3,102,123 0
------------------- ----------------- ------------------ ----------------
Net income (loss) $3,004,572 ($473,343) $3,042,489 ($801,199)
=================== ================= ================== ================
Income (loss) per share from continuing
operations -
Basic ($0.02) ($0.10) $0.01 ($0.15)
Diluted ($0.02) ($0.10) $0.01 ($0.15)
Loss per share from discontinued
operations
Basic ($0.01) ($0.03) ($0.02) ($0.07)
Diluted ($0.01) ($0.03) ($0.02) ($0.07)
Gain from sale of discontinued operations -
Basic $0.87 $0.00 $0.85 $0.00
Diluted $0.81 $0.00 $0.81 $0.00
Net income (loss) per share
Basic $0.84 $(0.13) $0.84 $(0.22)
=================== ================= ================== ================
Diluted $0.78 $(0.13) $0.80 $(0.22)
=================== ================= ================== ================
Weighted average basic common shares
outstanding 3,585,671 3,645,421 3,633,171 3,645,421
=================== ================= ================== ================
Weighted average diluted common shares 3,849,440 3,645,421 3,783,141 3,645,421
outstanding =================== ================= ================== ================
-4-
K2 DESIGN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1998 1997
----------------------------------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $3,042,489 $ (801,199)
Net gain from sale of discontinued operation (3,102,123) -
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities-
Recognition of deferred compensation 51,641 -
Depreciation 177,279 118,807
Changes in-
Accounts receivable 2,265,662 417,835
Prepaid and other assets 46,516 (43,845)
Restricted Cash - (638,614)
Costs in excess of billing (77,515) -
Other assets 701 400
Accounts payable (1,090,077) (307,567)
Accrued compensation and payroll taxes (86,274) (13,211)
Other accrued expenses 204,668 (107,885)
Deferred revenue and customer advances (539,064) (166,169)
Customer advances 6,446 -
------------------ ------------------
Net cash provided by (used in) operating activities 900,349 (1,541,448)
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of discontinued operation 1,024,307 -
Purchase of fixed assets (39,420) (509,537)
------------------ ------------------
Net cash provided by (used in) investing activities 984,887 (509,537)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of Treasury Stock (75,266) -
Proceeds from notes payable - 500,000
Principal payments on capital lease obligations (40,918) (32,140)
------------------ ------------------
Net cash (used in) provided by financing activities (116,184) 467,860
------------------ ------------------
Net increase (decrease) in cash 1,769,052 (1,583,125)
Cash, beginning of period 2,242,988 3,867,430
------------------ ------------------
Cash, end of period $4,012,040 $2,284,305
================== ==================
-5-
K2 DESIGN, INC. AND SUBSIDIARY
Six Months Ended
June 30,
1998 1997
------------------ ------------------
(unaudited) (unaudited)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for-
Interest 37,690 12,932
================== ==================
Income taxes - 4,956
================== ==================
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Assets acquired under capital lease obligations - 41,731
================== ==================
-6-
K2 DESIGN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 1998 and 1997
1. ORGANIZATION AND BUSINESS
K2 Design, Inc. ("K2" or the "Company") commenced operations on March 1,
1993 as a partnership. In January 1995 the Partnership contributed its
capital into a newly formed corporation and elected S Corporation status.
Effective January 1, 1996, the Company was reorganized as a Delaware C
corporation having a wholly owned operating subsidiary incorporated in New
York. The reorganized corporation is authorized to issue 9,000,000 shares
of common stock, par value $.01 per share, and 1,000,000 shares of
preferred stock, par value $.01 per share.
K2 is a full service interactive communications, design and technology
company, engaged primarily in the business of interactive advertising.
Private Placements
On February 29, 1996, the Company consummated a private placement offering
in which it sold 200,000 shares of its common stock at $1.25 per share. On
May 9, 1996, the Company consummated a second private placement offering in
which it sold 400,002 additional shares of its common stock at $1.75 per
share.
Initial Public Offering
On July 26, 1996, the Company consummated an initial public offering in
which 1,149,939 units of the Company's securities were sold to the public
(the "Public Units") at $6.00 per unit, each consisting of one share of
Common Stock and two warrants to purchase one share of Common Stock at
$7.50. The net proceeds from this offering of approximately $5,600,000 were
used for working capital and general corporate purposes.
Discontinued Operations
On June 1, 1998, the Company sold its CLIQNOW! business unit to 24/7 Media,
Inc. ("TFSM") for gross proceeds of $4 million, consisting of $1 million of
cash and $3 million of TFSM Convertible Redeemable Preferred Stock. Net
proceeds to the Company were approximately $3.3 million, prior to
transaction costs but after giving effect to payments to certain employees
of the CLIQNOW! business unit. On August 14, 1998, TFSM's registration
statement for its initial public offering was declared effective by the
Securities and Exchange Commission. As a result, the Company's Convertible
Redeemable TFSM Preferred Stock automatically converted on that date into
approximately 197,500 shares of common stock of TFSM (which may be sold
commencing February 14, 1999). Accordingly, the consolidated financial
statements exclude the results of operations attributable to the CLIQNOW!
business unit, which are consolidated in the line item "Net loss from
discontinued operations." However, although accounting principles
allocate certain Company expenses to the discontinued operations, certain
of those expenses remain even after the sale of CLIQNOW! (e.g., rent
expenses). Therefore, the Company's operating results from continuing
operations for the periods discussed herein are not necessarily
representative of future periods.
-7-
2. Net Income (Loss) Per Share of Common Stock
SFAS 128, "Earnings per Share" establishes new standards for computing and
presenting earnings per share (EPS). The new standard requires the
presentation of basic EPS and diluted EPS. Basic EPS is calculated by
dividing income available to common shareholders by the weighted average
number of shares of common stock outstanding during the period. Diluted EPS
is calculated by dividing income available to common shareholders by the
weighted average number of common shares outstanding adjusted to reflect
potentially dilutive securities.
In accordance with SFAS 128, the following table reconciles net income
(loss) and share amounts used to calculate basic and diluted income (loss)
per share:
Three Months Ended June 30, Six months Ended June 30,
1998 1997 1998 1997
---------------- ----------------- -------------------- -----------------
(unaudited) (unaudited)
Numerator : Net Income (loss) $3,004,572 ($473,343) $3,042,489 ($801,999)
Denominator: Weighted average 3,585,671 3,645,421 3,633,171 3,645,421
number of common shares
outstanding - Basic
Weighted average number of common 3,849,440 3,645,421 3,783,141 3,645,421
shares outstanding - Diluted
Net income (loss) per share
Basic $0.84 ($0.13) $0.84 $(0.22)
Diluted $0.78 ($0.13)* $0.80 $(0.22)*
---------------------------
*Excludes outstanding stock options as of June 30, 1997 as they are
antidilutive.
-8-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following presentation of management's discussion and analysis of
the Company's financial condition and results of operations should be read in
conjunction with the Company's Consolidated Financial Statements, the
accompanying notes thereto and other financial information appearing elsewhere
in this Report. This section and other parts of the Report contain
forward-looking statements that involve risks and uncertainties. The Company's
actual results may differ significantly from the results discussed in the
forward-looking statements. Readers are encouraged to review "Factors Affecting
Operating Results and Market Price of Stock" commencing on page 14 of the
Company's 1997 Annual Report on Form 10-KSB for a discussion of these risks and
uncertainties.
RESULTS OF OPERATIONS
General
The Company is a full-service interactive marketing and communications
company. The Company provides such services as development of online brand,
communications and technical strategies, media placement on Web sites,
consulting services regarding Web site usage and user characteristics, live
Internet broadcasts and the development of CD-ROM discs, and print collateral
systems.
Revenues are recognized on a percentage of completion basis. Provisions
for any estimated losses on uncompleted projects are made in the period in which
such losses are determinable. Most of the Company's revenues has been generated
on a fixed fee or cap fee basis. The Company also provides ongoing services to
certain customers, including one customer for which the Company is
agency-of-record.
Since November 1997, the Company has begun to reduce expenses in an
effort to bring them in line with revenue levels. Accordingly, the Company
implemented cost cutting measures, including a reduction in selling, general and
administrative personnel, consolidation of offices and a reduction in usage of
independent contractors. Nevertheless, the Company's failure to expand its
business in an efficient manner could have a material adverse effect on the
Company's business, operating results and financial condition. In addition,
there can be no assurance that the Company's future revenues will be sufficient
to support its existing and anticipated expense levels or that the Company will
be able to maintain these reduced expense levels.
In addition, on June 1, 1998, the Company sold its CLIQNOW! business
unit to 24/7 Media, Inc. ("TFSM") for gross proceeds of $4 million, consisting
of $1 million of cash and $3 million of TFSM Convertible Redeemable Preferred
Stock. Net proceeds to the Company were approximately $3.3 million, prior to
transaction costs but after giving effect to payments to certain employees of
the CLIQNOW! business unit. On August 14, 1998, TFSM's registration statement
for its initial public offering was declared effective by the Securities and
Exchange Commission. As a result, the Company's Convertible Redeemable TFSM
Preferred Stock automatically converted on that date into approximately 197,500
shares of common stock of TFSM (which may be sold commencing February 14, 1999).
Accordingly, the discussion below excludes the results of operations
attributable to the CLIQNOW! business unit, which are consolidated in the
Company's financial statements in the line item "Net loss from discontinued
operations." However, although accounting principles allocate certain Company
expenses to the discontinued operations, certain of those expenses remain even
after the sale of CLIQNOW! (e.g., rent expenses). Therefore, the Company's
operating results from continuing operations for the periods discussed herein
are not necessarily representative of future periods.
-9-
The changes in the various line-items discussed below reflect the
impact of the Company's cost cutting measures implemented commencing in November
1997.
Percentage of Revenues Percentage of Revenues
For the Three Months Ended For the Six Months Ended
June 30, June 30,
1998 1997 1998 1997
------------------------------------------ ---------- -- -------------
(unaudited) (unaudited)
Revenues: 100.00% 100.00% 100.00% 100.00%
Operating expenses:
Direct salaries and costs 63.4% 76.1% 66.1% 73.6%
Selling, general and administrative 36.2% 53.1% 30.2% 44.7%
Depreciation 4.7% 5.5% 4.4% 4.2%
Total operating expenses 104.3% 134.7% 100.7% 122.5%
Loss from continuing operations before
interest and discontinued operations (4.3)% (34.7)% (0.7)% (22.5)%
Interest and other Income, net 1.1% 2.8% 1.4% 2.5%
Income (loss) before income tax provision and
discontinued operations (3.2)% (31.9)% 0.7% (20.0)%
Provision for income taxes 0.0% 0.3% 0.0% 0.2%
Income (loss) from continuing operations (3.2)% (32.2)% 0.7% (20.2)%
Loss from discontinued operations (2.0)% (10.9)% (2.1)% (9.0)%
Gain from sale of discontinued operations 163.7% 0.0% 76.9% 0.0%
Net income (loss) 158.5% (43.1)% 75.5% (29.2)%
Revenues
Revenues for the three months ended June 30, 1998 and 1997 were
approximately $1,895,000 and $1,100,000 respectively, or an increase of
approximately 73%. During the three months ended June 30, 1998, Standard & Poors
accounted for approximately 18% of the Company's revenues. During the three
months ended June 30, 1997, WavePhore, Toys "R" Us Corporation and Bell
Communications Research, Inc. accounted for approximately 19%, 19% and 12% of
the Company's revenues, respectively.
Revenues for the six months ended June 30, 1998 and 1997 were
approximately $4,036,000 and $2,747,000, respectively, or an increase of
approximately 47%. During the six months ended June 30, 1998, Standard & Poors,
Bell Atlantic and Planet Direct, Inc., accounted for approximately 21%, 10% and
8% of the Company's revenues, respectively. During the six months ended June 30,
1997, WavePhore and Toys "R" Us Corporation and Chase Manhattan Bank accounted
for approximately 32%, 17% and 7% of the Company's revenues, respectively.
The increase in revenues in the three and six months ended June 30,
1998 as compared to the three and six months ended June 30, 1997 resulted
primarily because of increased market acceptance for services provided by the
Company and the Company's reputation in the industry.
Direct Salaries and Costs
Direct salaries and costs include all direct labor costs and other
direct costs related to project performance, such as independent contractors,
freelance labor, supplies, and printing and equipment costs. As a percentage of
revenues, direct salaries and costs decreased by more than 12% in the three
months ended June 30, 1998, as compared to the same period in 1997. In absolute
dollars, direct salaries and costs increased by approximately
-10-
$367,000 from approximately $835,000 in the 1997 quarter to approximately
$1,202,000 in the 1998 quarter. In the 1998 period, direct salaries and costs
consisted primarily of approximately $500,000 of media placement costs, and
approximately $438,000 paid as direct labor costs. In the 1997 period, direct
salaries and costs consisted primarily of approximately $526,000 paid as direct
labor costs and approximately $219,000 of media placement costs.
As a percentage of revenues, direct salaries and costs decreased by
more than 7% in the six months ended June 30, 1998, as compared to the same
period in 1997. In absolute dollars, direct salaries and costs increased by
approximately $647,000 from approximately $2,021,000 in the six months ended
June 30, 1997 to approximately $2,668,000 in the six months ended June 30, 1998.
In the 1998 period, direct salaries and costs consisted primarily of
approximately $1,400,000 of media placement costs, and approximately $840,000
paid as direct labor costs. In the 1997 period, direct salaries and costs
consisted primarily of approximately $967,000 paid as direct labor costs and
approximately $436,000 of the media placement costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended
June 30, 1998 and 1997 were approximately $687,000 (36% of revenues) and
$583,000 (53% of revenues), respectively, and consisted primarily of labor
costs, professional fees, occupancy costs, travel, office expenses and supplies
and marketing and advertising, among other things. The decrease in both absolute
dollars and as a percentage of revenues reflects the application of tighter
controls in connection with the Company's cost reduction plan.
Selling, general and administrative expenses for the six months ended
June 30, 1998 and 1997 were approximately $1,221,000 (30% of revenues) and
$1,228,000 (45% of revenues), respectively, and consisted primarily of labor
costs, professional fees, occupancy costs, travel, office expenses and supplies
and marketing and advertising, among other things. The decrease in both absolute
dollars and as a percentage of revenues reflects the application of tighter
controls in connection with the Company's cost reduction plan.
Depreciation
Depreciation expense was approximately $88,000 and $60,000 in the three
months ended June 30, 1998 and 1997, respectively, and approximately $177,000
and $116,000 in the six months ended June 30, 1998 and 1997, respectively, and
related to depreciation of equipment and leasehold improvements. The Company's
depreciation expenses in 1998 have increased significantly as a result of
depreciation of the Company's equipment and leasehold improvement in connection
with the acquisition of computer equipment and the relocation of its offices.
Income Taxes
As a result of the gain from the sale of discontinued operations, the
Company's net operating loss carryforward has been reduced by approximately $3.2
million to approximately $400,000.
Gain on Sale of Discontinued Operations
On June 1, 1998, the Company sold its CLIQNOW! business unit to 24/7 Media, Inc.
("TFSM") for gross proceeds of $4 million, consisting of $1 million of cash and
$3 million of TFSM Convertible Redeemable Preferred Stock. Net proceeds to the
Company were approximately $3.3 million, prior to transaction costs but after
giving effect to payments to certain employees of the CLIQNOW! business unit. On
August 14, 1998, TFSM's registration statement for its initial public offering
was declared effective by the Securities and Exchange Commission. As a result,
the Company's Convertible Redeemable TFSM Preferred Stock automatically
converted on that date into approximately 197,500 shares of common stock of TFSM
(which may be sold commencing February 14, 1999).
-11-
Fluctuations in Quarterly Operating Results
Quarterly revenues and operating results have fluctuated and will
fluctuate as a result of a variety of factors. These factors, some of which have
affected the Company and some of which are beyond the Company's control, include
the timing of the completion, material reduction or cancellation of major
projects, the loss of a major customer or the termination of a relationship with
a channel source, timing of the receipt of new business, timing of the hiring or
loss of personnel, changes in the pricing strategies and business focus of the
Company or its competitors, capital expenditures, operating expenses and other
costs relating to the expansion of operations, general economic conditions and
acceptance and use of the Internet.
The Company's quarterly operating margins may also fluctuate from
period to period depending on the relative mix of lower cost full time employees
versus higher cost independent contractors. In November 1997, the Company began
to reduce expenses in an effort to bring them in line with current and
anticipated revenue levels. In addition, management believes that the Company's
results of operations in the third quarter of 1998 will reflect a significant
decrease in revenues as compared to the comparable quarter of 1997 and an
operating loss, principally as a result of the Company's focus on reorganizing
its senior management team, including the promotion of Matthew de Ganon to the
additional post of Chief Executive Officer, who replaced David Centner. Mr.
Centner resigned from K2 to pursue other interests.
Liquidity and Capital Resources
The Company's cash increased by $1,769,052, or 77.4% from $2,242,988 at
December 31, 1997 to $4,012,040 at June 30, 1998. The increase was principally
due to the Company's continued focus on collection of accounts receivable and
actively managing accounts payable.
The Company's cash position and its interest in TFSM restricted common
stock (which may be sold commencing February 14, 1999), was further enhanced by
approximately $3.3 million, before giving effect to transaction costs.
The Company is dependent on its cash of approximately $4 million (at
June 30, 1998), together with cash generated by operations for working capital
in order to be competitive, to meet the increasing demands of service, quality
and pricing and for any expansion of its business. While the Company believes
that its cash position together with cash expected to be generated by operations
will be sufficient to finance its operations for at least one year, the Company
may nevertheless require future financing in order to satisfy its working
capital needs, which may be unavailable or prohibitively expensive since the
Company's only assets available to secure additional financing are accounts
receivable.1 Accordingly, the Company may not have the funds to relieve any
liquidity problems, should they arise, or to finance any expansion of its
business.
Net cash provided by the Company's operating activities was $900,349
for the six months ended June 30, 1998 and related primarily to a substantial
decrease in accounts receivable, which was partially offset by an increase in
accounts payable and accrued expenses payable as is indicated in the statement
of cash flows.
In the six months ended June 30, 1998 the Company spent approximately
$14,268 on capital expenditures,
- --------
1 This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations. See "Factors
Affecting Operating Results and Market Price of Stock" contained in
the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997 for a discussion of the risks and uncertainties
which may affect this statement.
-12-
consisting of furniture, fixtures and leasehold improvements acquired and
made in connection with the Company's recent relocation of its principal
offices. Additional capital expenditures of approximately $60,000 are
expected to be made in connection with office leasehold improvements.
PART II - OTHER INFORMATION
Item 1. Not applicable
Item 2. Changes in Securities and Use of Proceeds
The following information is provided with respect to the use of proceeds
from the Company's IPO:
1. Name of issuer: K2 Design, Inc.
2. a) Effective date of the registration statement: July 26, 1996
b) Commission file number assigned to issuer: 333-4319
c) CUSIP number assigned to issuer: 482731
3. Offering commencement date: July 26, 1996
4. Managing underwriter: Donald & Co. Securities Inc.
5. Title of each class of security
a) Units
b) Each Unit consists of one share of Common Stock and one
redeemable common stock purchase warrant (each, a "Warrant"). Two
Warrants entitle the holder to purchase one share of Common Stock
for $7.50.
6. Amount and aggregate offering price
a) Units:
Amounts registered 1,150,000
Aggregate price of offering amount registered $6,900,000
Amount sold 1,149,939
Aggregate offering price of amount sold $6,899,634
For the period ending June 30, 1998
7. Costs of offering: Direct or indirect
payments to others
a) Underwriting discounts and commissions $ 704,147
b) Finder's Fees $ -0-
c) Expenses paid to or for underwriters $ 211,989
d) Other expenses $ 550,355
e) Total Expenses $1,466,491
8. Net offering proceeds after expenses in item 7: $5,433,143
-13-
9. Use of net offering proceeds:
a) Construction of plant, building and facilities $ 303,530
b) Purchase and installation of machinery
and equipment $1,171,010
c) Purchase of real estate
d) Acquisition of other business(es)
e) Repayment of Indebtedness
f) Working capital $3,958,603
g) Money market
h) Cash and investments - less than 90 day
i) Other cash assets
j) Restricted Cash
10. Do the use(s) of proceeds in Item 9 represent a material change in the
use(s) of proceeds described in the prospectus? No.
11. This will be the final submission of form S-R. The IPO funds have been
fully deployed.
Items 3.-5. Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Exhibit 27.1 - Final Data Schedule (included only in
the electronic filing with the Securities and Exchange
Commission)
(b) A report on Form 8-K was filed on June 17, 1998 with respect to
the sale of the CLIQNOW! business unit to TFSM on June 1, 1998.
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.
K2 DESIGN, INC.
Date: August 19, 1998 By: /s/ Matthew G. de Ganon
-----------------------
Matthew G. de Ganon
Principal Executive Officer
By: /s/ Seth Bressman
----------------------
Seth Bressman
Principal Financial and
Accounting Officer
-14-