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SEC FILE NUMBER
0-23396
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CUSIP NUMBER
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 12b-25
NOTIFICATION OF LATE FILING
(Check One): |_| Form 10-KSB |_| Form 20-F |_| Form 11-K
|X| Form 10-QSB |_| Form N-SAR
For Period Ended: September 30, 1998
-------------------
[ ] Transition Report on Form 10-K
[ ] Transition Report on Form 20-F
[ ] Transition Report on Form 11-K
[ ] Transition Report on Form 10-Q
[ ] Transition Report on Form N-SAR
For the Transition Period Ended:
----------------------------------------
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Read Attached Instruction Sheet Before Preparing Form. Please Print or Type.
Nothing in this form shall be construed to imply that the Commission has
verified any information contained herein.
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If the notification relates to a portion of the filing checked above,
identify the item(s) to which the notification relates:
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PART I - REGISTRANT INFORMATION
K2 Design, Inc.
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Full Name of Registrant
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Former Name if Applicable
30 Broad Street
16th Floor
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Address of Principal Executive Office (Street and Number)
New York, New York, 10004
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City, State and Zip Code
PART II - RULES 12b-25(b) AND (c)
If the subject report could not be filed without unreasonable effort or
expense and the registrant seeks relief pursuant to Rule 12b-25(b), the
following should be completed. (Check box if appropriate)
/X/ (a) The reasons described in reasonable detail in Part III of this form
could not be eliminated without unreasonable effort or expense;
/X/ (b) The subject annual report, or semi-annual report, transition report
on Form 10-K, Form 20-F, Form 11-K, Form N-SAR, or portion thereof,
will be filed on or before the fifteenth calendar day following the
prescribed due date; or the subject quarterly report or transition
report on Form 10-Q, or portion thereof, will be filed on or before the
fifth calendar day following the prescribed due date; and
/ /(c) The accountant's statement or other exhibit required by Rule
12b-25(c) has been attached if applicable.
SEC 1344(8-89) (Attach Extra Sheets if Needed)
PART III - NARRATIVE
State below in reasonable detail the reasons why the Form 10-K, 11-K, 10-Q,
N-SAR, or the transition report or portion thereof, could not be filed
within the prescribed time period. (Attach Extra Sheets if Needed)
The Company was delayed in preparation of its Quarterly Report on
Form 10-QSB due to administrative problems in processing relevant
information therefor and management's focus on business and
personnel issues subsequent to the end of the fiscal period.
PART IV - OTHER INFORMATION
(1) Name and telephone number of person to contact in regard to this
notification
Neil S. Belloff, Esq. (212) 969-3208
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(Name) (Area Code) (Telephone Number)
(2) Have all other periodic reports required under Section 13 or 15(d)
of the Securities Exchange Act of 1934 or Section 30 of the
Investment Company Act of 1940 during the preceding 12 months (or
for such shorter) period that the registrant was required to file
such reports) been filed? If answer is no, identify report(s).
/x/ Yes / / No
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(3) Is it anticipated that any significant change in results of
operations from the corresponding period for the last fiscal year
will be reflected by the earnings statements to be included in the
subject report or portion thereof?
/x/ Yes / / No
If so, attach an explanation of the anticipated change, both
narratively and quantitatively, and, if appropriate, state the
reasons why a reasonable estimate of the results cannot be made.
See Attachment "A".
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K2 Design, Inc.
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(Name of Registrant as Specified in Charter)
has caused this notification to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: November 16, 1998 By: /s/ Seth Bressman
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Seth Bressman
Chief Financial Officer
INSTRUCTION: The form may be signed by an executive officer of the
registrant or by any other duly authorized representative. The name and
title of the person signing the form shall be typed or printed beneath the
signature. If the statement is signed on behalf of the registrant by an
authorized representative (other than an executive officer), evidence of the
representative's authority to sign on behalf of the registrant shall be
filed with the form.
Intentional misstatements or omissions of fact constitute Federal Criminal
Violations (see 18 U.S.C. 1001).
SEC 1344(8-89) (Attach Extra Sheets if Needed)
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GENERAL INSTRUCTIONS
1. This form is required by Rule 12b-25 (17 CFR 240. 12b-25) of the
General Rules and Regulations under the Securities Exchange Act of
1934.
2. One signed original and four conformed copies of this form and
amendments thereto must be completed and filed with the Securities and
Exchange Commission, Washington, D.C. 20549, in accordance with Rule
0-3 of the General Rules and Regulations under the Act. The information
contained in or filed with the form will be made a matter of public
record in the Commission files.
3. A manually signed copy of the form and amendments thereto shall be
filed with each national securities exchange on which any class of
securities of the registrant is registered.
4. Amendments to the notifications must also be filed on Form 12b-25 but
need not restate information that has been correctly furnished. The
form shall be clearly identified as an amended notification.
SEC 1344(8-89) (Attach Extra Sheets if Needed)
ATTACHMENT "A"
K2 DESIGN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
Three Months Ended
September 30, Nine Months Ended September 30,
1998 1997 1998 1997
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(unaudited) (unaudited)
Revenues $1,901,265 $1,636,991 $ 5,936,879 $ 4,384,467
Direct salaries and costs 1,448,140 1,225,886 4,116,233 3,247,227
Selling, general and administrative
expenses 655,281 737,674 1,876,395 1,966,171
Depreciation 86,539 86,305 263,818 202,011
--------- ---------- ------------ -----------
Loss from continuing operations before (288,695) (412,874) (319,567) (1,030,942)
interest and other income, net, income taxes and
discontinued operations
Interest and other income, net 76,322 25,003 135,306 93,878
--------- ---------- ----------- -----------
Loss before income tax provision
and discontinued operations (212,373) (387,871) (184,261) (937,064)
Provision for income taxes 18,870 9,014 21,307 13,970
--------- ---------- ----------- -----------
Loss from continuing operations ($231,243) ($396,885) ($205,568) ($951,034)
Loss from discontinued operations (0) (198,100) (85,309) (445,150)
Gain (loss) from sale of discontinued operations (107,919) 0 2,994,204 0
--------- ---------- ----------- -----------
Net income (loss) ($339,162) ($594,985) $ 2,703,327 ($1,396,184)
========= ========== =========== ===========
Loss per share from continuing
operations -
Basic ($0.07) ($0.11) ($0.06) ($0.26)
Diluted ($0.07) ($0.11) ($0.06) ($0.26)
Loss per share from discontinued
operations
Basic ($0.00) ($0.05) ($0.02) ($0.12)
Diluted ($0.00) ($0.05) ($0.02) ($0.12)
Gain (loss) per share
from sale of discontinued operations -
Basic ($0.03) ($0.00) $0.83 ($0.00)
Diluted ($0.03) ($0.00) $0.80 ($0.00)
Net income (loss) per share
Basic ($0.10) ($0.16) $0.75 ($0.38)
========= ========== =========== ===========
Diluted ($0.10) ($0.16) $0.72 ($0.38)
========= ========== =========== ===========
Weighted average basic common shares
outstanding 3,508,579 3,680,671 3,591,292 3,657,433
========= ========== =========== ============
Weighted average diluted common shares
outstanding 3,508,579 3,680,671 3,742,304 3,657,433
========= ========== =========== ============
SEC 1344(8-89) (Attach Extra Sheets if Needed)
Revenues
Revenues for the three months ended September 30, 1998 and 1997 were
approximately $1,901,000 and $1,637,000, respectively, or an increase of
approximately 16%. However, net revenues (i.e. gross revenues less pass-through
expenses such as media placement costs) during the same periods were $891,939
and $1,389,163, respectively, or a decrease of 36%. During the three months
ended September 30, 1998, WavePhore, Standard & Poors and Lexis-Nexis accounted
for approximately 72%, 8% and 7%, respectively, of the Company's revenues.
During the three months ended September 30, 1997, Cox Interactive Media, Inc.,
Bell Communications Research, Inc. and American Express Company accounted for
approximately 23%, 19% and 14%, respectively, of the Company's revenues.
Revenues for the nine months ended September 30, 1998 and 1997 were
approximately $5,937,000 and $4,384,000, respectively, or an increase of
approximately 35%. However, during the nine months ended September 30, 1998, net
revenues were $3,373,600 compared to net revenues of $3,700,629 for the 1997
period, a decrease of $327,029 or 9%. During the nine months ended September 30,
1998, WavePhore, Standard & Poors, and Bell Atlantic, accounted for
approximately 25%, 17% and 6%, respectively, of the Company's revenues. During
the nine months ended September 30, 1997, WavePhore, Toys "R" Us Corporation and
Bell Communications Research, Inc. accounted for approximately 21%, 10% and 10%,
respectively, of the Company's revenues.
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 increased by
approximately 1% for the three months ended September 30, 1998, as compared
to the same period in 1997. In absolute dollars, direct salaries and costs
increased by approximately $222,000 from approximately $1,226,000 for the
1997 quarter to approximately $1,448,000 for the 1998 quarter. In the 1998
period, direct salaries and costs consisted primarily of approximately
$931,000 of media placement costs, and approximately $470,000 paid as direct
labor costs. In the 1997 period, direct salaries and costs consisted
primarily of approximately $248,000 paid as media placement costs and
approximately $597,000 paid as direct labor costs.
As a percentage of revenues, direct salaries and costs decreased by
approximately 5% for the nine months ended September 30, 1998, as compared to
the same period in 1997. In absolute dollars, direct salaries and costs
increased by approximately $869,000 from approximately $3,247,000 for the
nine months ended September 30, 1997 to approximately $4,116,000 for the nine
months ended September 30, 1998. In the 1998 period, direct salaries and
costs consisted primarily of approximately $2,365,000 of media placement
costs, and approximately $1,338,000 paid as direct labor costs. In the 1997
period, direct salaries and costs consisted primarily of approximately
$684,000 paid as media placement costs and approximately $1,563,000 paid as
direct labor costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended
September 30, 1998 and 1997 were approximately $655,000 (34.5% of revenues)
and $738,000 (45.0% 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 nine months ended
September 30, 1998 and 1997 were approximately $1,876,000 (31.6% of
revenues) and $1,966,000 (44.8% of revenues), respectively, and consisted
primarily of labor costs, professional fees, occupancy costs, travel, office
expenses and supplies and marketing and
SEC 1344(8-89) (Attach Extra Sheets if Needed)
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 $87,000 and $86,000 for three
months ended September 30, 1998 and 1997, respectively, and approximately
$264,000 and $202,000 for the nine months ended September 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 carry forward has been reduced by approximately
$3 million to approximately $140,000.
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. The Company recorded a gain on sale with respect
to this transaction of $2,994,204 for the nine month period ended September 30,
1998.
SEC 1344(8-89) (Attach Extra Sheets if Needed)