UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark one)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarterly period ended March 31, 2001
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
Commission file number 0-29705
THE MURDOCK GROUP HOLDING CORPORATION
(Exact name of small business issuer as specified in its charter)
UTAH 87-0574421
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
4084 SOUTH COMMERCE DRIVE, SALT LAKE CITY, UTAH 84107
(Address of principal executive offices) (Zip Code)
(801) 268-3232
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for past 90 days. Yes [X] No [ ]
As of May 15, 2001, the issuer had 366,757,965 outstanding shares of common
voting shares
Transitional Small Business Disclosure Format: Yes [ ] No [X]
1
Table of Contents
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis or Plan of Operation 12
Part II - Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
2
THE MURDOCK GROUP HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
March 31, December 31,
2001 2001
--------------- -------------
Current Assets
Cash .................................................................... $ 780 $ 997
Current portion of contracts receivable, net ............................. 720,980 712,680
Accounts receivable - related parties..................................... 271,110 226,167
Accrued interest receivable............................................... 280,873 233,503
Prepaid and other current assets.......................................... 55,953 46,163
--------------- -------------
Total Current Assets................................................. 1,329,696 1,219,510
-------------- -------------
Property and Equipment, at cost
Computer equipment........................................................ 487,333 487,333
Software.................................................................. 85,061 85,061
Furniture and fixtures.................................................... 376,075 382,037
Leasehold improvements ................................................... 75,358 75,358
--------------- -------------
1,023,827 1,029,789
Less: accumulated depreciation and amortization........................... (556,065) (510,829)
--------------- -------------
Net Property and Equipment .......................................... 467,762 518,960
--------------- -------------
Other Assets
Contracts receivable, net - less current portion.......................... 173,512 145,195
Deposits and other assets................................................. 30,456 30,456
Investments............................................................... 1,000,000 12,724,508
--------------- -------------
Total Other Assets................................................... 1,203,968 12,900,159
--------------- -------------
Total Assets....................................................................$ 3,001,426 $ 14,638,629
=============== =============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
THE MURDOCK GROUP HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' DEFICIT
March 31, December 31,
2001 2001
--------------- -------------
Current Liabilities
Accounts payable..........................................................$ 1,873,879 $ 1,970,700
Accrued liabilities....................................................... 1,559,571 1,953,034
Short-term notes payable.................................................. 3,030,850 8,537,726
Short-term notes payable - related parties................................ 1,180,794 960,795
Current portion of notes payable.......................................... 1,497,689 1,296,788
Current portion of obligations under capital leases ...................... 89,794 89,794
--------------- -------------
Total Current Liabilities............................................ 9,232,577 14,808,837
--------------- -------------
Long-Term Liabilities
Notes payable - long-term................................................. 208,486 1,859,388
Obligations under capital leases - long-term.............................. 29,009 48,742
--------------- -------------
Total Long-Term Liabilities.......................................... 237,495 1,908,130
--------------- -------------
Redeemable Common Stock
Common Stock - no par value, 20,529,550 shares and 1,047,727 shares issued
and outstanding, respectively, redeemable
at $1.50 per share....................................................... 1,571,590 1,571,590
--------------- -------------
Stockholders' Deficit
Preferred Stock - no par value, 25,000,000 shares authorized,
no shares issued or outstanding......................................... -- --
Common Stock - no par value, 600,000,000 shares
authorized; 329,276,142 shares and 207,975,658 shares issued and
outstanding, respectively............................................... 40,846,276 36,380,819
Accumulated deficit....................................................... (48,886,512) (40,030,747)
--------------- -------------
Total Stockholders' Deficit.......................................... (8,040,236) (3,649,928)
--------------- -------------
Total Liabilities and Stockholders' Deficit.....................................$ 3,001,426 $ 14,638,629
=============== =============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
THE MURDOCK GROUP HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Three Months
Ended March 31, Ended March 31,
2001 2000
----------------------- -----------------------
Revenue
Service revenue, inclusive of interest charged $ 409,056 $ 630,339
Less contract discounts and cancellations (32,587) (55,640)
---------------------- -----------------------
Net Revenue 376,469 574,699
Cost of Revenue 127,188 133,843
---------------------- -----------------------
Gross Profit 249,281 440,856
---------------------- -----------------------
Operating Expenses
Selling, general and administrative 554,683 1,855,981
New products research and development --- 725,405
Contingency Reserve 10,000 ---
Loss on Disposal of Investments 5,809,097 ---
---------------------- -----------------------
Total Operating Expenses 6,373,780 2,581,386
---------------------- -----------------------
Other Income (Expense)
Interest expense (2,453,616) (1,817,330)
Other income 15,350 10,895
Loss in Subsidiary (293,000) ---
---------------------- -----------------------
Total Other Income (Expenses) (2,731,266) (1,806,435)
---------------------- -----------------------
Loss Before Minority Interest 8,855,765 3,946,965
Minority Interest in Loss of Consolidated Subsidiary --- 1,181
---------------------- -----------------------
Net Loss $ (8,855,765) $ (3,945,784)
====================== =======================
Basic and Diluted Net Loss Per Common Share
$ (0.03) $ (0.22)
====================== =======================
Weighted Average Shares Used in Per Share Calculations 301,753,476 18,224,971
====================== =======================
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
THE MURDOCK GROUP CAREER SATISFACTION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the For the
Three Months Three Months
Ended March 31, Ended March 31,
2001 2000
-------------------- -------------------
Cash Flows From Operating Activities
Net loss $ (8,855,765) $ (3,945,784)
Adjustments to reconcile net loss to net cash used in
Operating activities:
Expenses paid with common stock, options, and
notes payable 2,464,022 73,093
Depreciation and amortization 47,578 120,717
Loss from sale, foreclosure, or impairment of assets 5,815,060 -
Loss from subsidiary 293,000 -
Change in operating assets and liabilities
Contracts receivable (29,306) 52,990
Accounts receivable related party (44,943) -
Accrued interest receivable (47,370) (16,948)
Prepaid expenses and other (17,104) (54,347)
Accounts payable (95,925) 649,651
Accrued liabilities 36,552 162,142
Unearned revenue - 100,000
-------------------- -------------------
Net Cash From Operating Activities (434,201) (2,858,486)
-------------------- -------------------
Cash Flows From Investing Activities
Purchases of property and equipment - (25,675)
Increase in note receivable - (34,643)
Proceeds from sale of real estate 125,000 -
-------------------- -------------------
Net Cash From Investing Activities 125,000 (60,318)
-------------------- -------------------
Cash Flows From Financing Activities
Proceeds from notes payable 345,819 4,178,405
Proceeds from related party notes payable 35,000 426,926
Principal payments on notes payable (89,500) (1,100,280)
Principal payments on related party notes payable (15,000) (292,517)
Payments on capital lease obligations (19,730) (141,878)
Payments for private placement offering - (76,359)
Proceeds from sale of stock 52,395 -
-------------------- -------------------
Net Cash From Financing Activities 308,984 2,994,297
-------------------- -------------------
Net Increase (Decrease) in Cash (217) 75,493
Cash at Beginning of Year 997 1,907
-------------------- -------------------
Cash at End of Year $ 780 $ 77,400
==================== ===================
The accompanying notes are an integral part of these
condensed consolidated financial statements.
6
THE MURDOCK GROUP CAREER SATISFACTION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the For the
Three Months Three Months
Ended March 31, Ended March 31,
2001 2000
Supplemental Cash Flow Information
Cash paid during period for:
Interest $ 21,860 $ 1,198,911
==================== ===================
Supplemental Disclosures of Noncash Investing and
Financing Activities
Stock issued in conversion of notes payable and accrued interest 1,656,040 357,616
Stock issued for investments in real estate - 73,800
Debt issued for investments in real estate - 79,200
Accrued interest and notes payable settled through sale of
Real estate 5,790,431 -
The accompanying notes are an integral part of these
condensed consolidated financial statements.
7
THE MURDOCK GROUP HOLDING CORPORATION
Notes To Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Nature of Operations and Principles of Consolidation
The accompanying interim condensed consolidated financial statements are
unaudited and have been prepared consistent with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. These statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's annual report on Form 10-KSB for the fiscal year ended December
31, 2000. Unless the context otherwise requires, reference to "the Company" or
"The Murdock Group" includes The Murdock Group Holding Corporation, a Utah
corporation, and its subsidiary, CareerWebSource.com, Inc., formerly
myjobsearch.com, inc., a Delaware corporation.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary to fairly present the Company's financial
position, results of operations and cash flows. The results of operations for
the three months ended March 31, 2001 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2001.
The Company is a job-search and employment training company. In addition, the
Company has significant leveraged instruments in real estate. The Company
focuses on providing services to professionals with five or more years of
experience who are dissatisfied with their career direction or current job
situation. The Company offers job-search training workshops, consultants and
coaches, and access to a job-search resource center. The Company also provides
full-service hiring assistance, including training, recruiting, and outplacement
to corporations.
The accompanying condensed consolidated financial statements include the
operations of CWS through April 16, 2000 on a consolidated basis and from April
17, 2000 by the equity method of accounting. Intercompany accounts and
transactions were eliminated through the date consolidation was discontinued.
Note 2 - Investment in Career Web Source
Investment in Career Web Source - In June 1999, the Company formed a Delaware
subsidiary called myjobsearch.com ("MJS") and transferred to MJS all the
Company's developmental materials for an interest in the web site
myjobsearch.com in exchange for 2,000,000 shares of common stock of MJS. During
2000, MJS changed its name to CareerWebSource ("CWS").
On April 17, 2000, the Company converted notes receivable of $1,800,000 from
CWS into 720,000 shares of CWS voting convertible preferred stock. On that same
date, CWS issued 1,632,800 shares of voting convertible preferred stock for $5.2
million after offering costs. This transaction resulted in the Company's
ownership interest in CWS decreasing to 45% of the total voting shares. Prior to
the year ending December 31, 2000, the percentage of ownership in CWS decreased
to 22% due to (i) the transfer of 1,050,000 shares of common stock to a
creditor--the shares had been pledged as collateral on a note and (ii) the
transfer of 200,000 common shares in conjunction with a conversion of debt to
the Company's and CWS' common stock. As a result of the decrease in ownership
percentage, the Company is required to account for its investment in CWS under
the equity method of accounting. On April 17, 2000, the Company's investment in
CWS was $524,387. To properly reflect the Company's investment in CWS under the
equity method of accounting on April 17, 2000, the Company recognized a gain in
the amount of $1,961,247. The Company elected to discontinue applying the equity
method in CWS when its investment was reduced to zero and did not provide for
additional losses. Accordingly, from April 17, 2000 through December 31, 2000,
the Company recognized only $524,387 in losses from its equity investment in CWS
which results in the Company having a zero investment in CWS at December 31,
2000. If CWS subsequently reports net income, the Company shall resume applying
the equity method only after the Company's share of that net income equals the
share of net losses not recognized during the period the equity method was
suspended. Because the Company had no basis in its investment in CWS the Company
recognized a $2,725,000 gain on its transfer of 1,250,000 shares of CWS stock
mentioned above.
During the quarter ending March 31, 2001, the company traded 8,002,857 shares of
Murdock stock for 128,667 shares of CareerWebSource increasing the percentage of
ownership in CWS to 24%. This resulted in an increased basis in CWS by the value
of $293,000. The company also recognized additional losses in the same amount
under the equity method of accounting.
8
Note 3 - Segment Information
The Company has two operating segments: career services and real estate. To date
all revenues from operations have been derived from the career development
services segment of the Company.
Note 4 - Revenue Recognition
The Company's career development program provides the participant an opportunity
to attend training classes and the optional use of other resources of the
Company such as its career library, job search software, personal coaching and
referral services. Revenue from job training services is recognized by the
Company upon the participant's completion of the training classes. Revenue is
recognized completely in the month it is earned for those services requiring
less than one month to complete. Cash discounts, cancellations, and write-offs
are recognized based on certain criteria such as time since last payment made,
cancellation requests negotiated and granted, and contract price reduction due
to early cash payment.
Note 5 - Investments in Real Estate
During the three months ended March 31, 2001, the Company sold several of its
real estate properties at a total carrying value of $11,724,528 for $5,915,431.
The sales price consisted of cash receipts of $125,000 and relief of debt and
accrued interest of $5,790,431. As a result of this sale, the Company recorded a
loss on sale of the investments of $5,809,097.
Note 6 - Redeemable Common Stock
In 1999, as part of the consideration given to a lender to acquire financing,
the Company issued 375,940 of common stock. The Company agreed to repurchase
these shares of common stock at $1.50 per share by June 1, 2000 if the public
market for these shares had not attained that level. A verbal agreement between
the parties extended this valuation guarantee with no specific date.
In 1999, the Company guaranteed the value of 714,667 shares of common stock
issued to individuals for $1,007,681 or $1.50 per share as part of the
consideration given in connection with the acquisition of certain real estate
investments. The Company agreed to repurchase these shares of common stock at
$1.50 per share at any time subsequent to January 1, 2001 at the individuals
demand. During the three months ended March 31, 2001, the Company issued
19,481,823 shares of common stock to these individuals in partial settlement of
this guarantee.
Note 7 - Common Stock Transactions
On March 29, 2001, with stockholder approval, the Company filed an amendment and
restatement of the Company's articles of incorporation which (i) increased the
number of authorized common shares from 300,000,000 to 600,000,000 and (ii)
increased the number of available options and warrants from 25,000,000 to
75,000,000.
Common Stock issued for Services, Loan Origination Fees and Accrued Liabilities
During the quarter ended March 31, 2001, the Company issued 3,200,000 shares of
common stock for services at prices ranging from $0.02 to $0.05 per share. These
shares of common stock were valued at $70,000 based on the fair market value of
the shares of common stock on the dates of issuance.
Common Stock issued for Debt
During the quarter ended March 31, 2001, the Company issued 54,839,178 shares of
common stock at prices ranging from $0.01 to $0.09 per share in satisfaction of
notes payable of $1,656,040 and accrued interest of $164,752. In some cases, the
Company issued shares of common stock at a discounted price. As a result of this
discount, the Company recorded a beneficial conversion feature on these shares.
The value of the beneficial conversion feature was determined as the difference
between the fair value of the Company's common stock on the date of conversion
and the conversion price. The value of the beneficial conversion feature was
$211,748 and was recognized as additional paid-in capital and interest expense.
9
Common Stock issued for Interest and Enticements to Settle Debt
During the quarter ended March 31, 2001, the Company issued 53,763,791 shares of
common stock at prices ranging from $0.02 to $0.10 per share for interest and
enticements to settle notes payable. The shares of common stock were valued at
$1,954,867 based on the fair market value of the shares of common stock on the
dates of issuance and charged to interest expense.
Other Common Stock Transactions
During the quarter ended March 31, 2001, the Company issued 1,494,658 shares of
common stock for cash proceeds of $52,395 ranging from $.023 to $0.04 per share.
During the quarter ended March 31, 2001, the Company issued 8,002,857 shares of
common stock for shares in a related party subsidiary "CWS" for a value of
$293,000 at price ranges of $0.04 to $0.05 per share.
Note 8 - Stock Options
At March 31, 2001 stock options outstanding were comprised of:
o Employee options totaling 7,781,918 shares with various vesting schedules.
During the three months ended March 31, 2001, 1,084,867 options were issued
to employees with no compensation expense required and 97,500 shares
forfeited.
o Non-employee options totaling 22,366,058 shares, of which 3,533,569 shares
were issued during the three months ended March 31, 2001 with immediate
vesting. During the three months ended March 31, 2001, interest expense
relating to these options has been recognized in the amount of $62,655.
Note 9 - Commitments and Contingencies Payroll Tax Contingency
Payroll Tax Contingency
During the fourth quarter 2000, the Company severed its relationship with the
employee leasing company with whom it processed payroll. In January 2001, the
Company retained another employee leasing company. However, in the interim, the
Company did not pay payroll taxes and has unpaid federal and state payroll tax
liabilities, which have been reflected in the financial statements. The Company
has notified the Internal Revenue Service regarding this matter, however, no
penalties and interest have yet been assessed. Through March 31, 2001, the
Company recorded a contingent liability of $40,494 for potential tax penalties.
Legal Matters
The Company is party to an outstanding lawsuit filed by Capital General
Corporation (CGC). CGC contends a deficiency on a loan balance in connection
with a foreclosure of two parcels of real estate. CGC is seeking approximately
$677,000 for the deficiency, punitive damages, and attorney fees. The Company
has responded to the lawsuit and denies being indebted to CGC and contends that
the principal owed was satisfied by the value of the two parcels of real estate.
The Company has recorded a $400,000 contingent liability during 2000 regarding
this issue.
The Company is the subject of other legal matters, which it considers incidental
to its business activities. It is the opinion of management, that the ultimate
disposition of these legal matters will not have a material impact on the
consolidated financial condition or results of operations of the Company.
Note 10 - Subsequent Events
On May 1, 2001 the Company purchased a commercial office/warehouse building for
$470,000 of which the Company assumed debt of $347,000, gave a note to seller
for $113,000 and paid $10,000 in cash. The Company then relocated its business
to this building.
The Company has an ongoing commitment for the office space located at 5295 South
300 West, Murray, Utah. Under the modified terms dated January 10, 2001, the
Company was to make payments under the following schedule:
10
Annual Monthly
Period Base Rent Base Rent
------ -------------- ------------
01/01/01 - 12/31/01 $ 327,486 $ 27,290
01/01/02 - 12/31/02 $ 344,726 $ 28,727
01/01/03 - 12/31/03 $ 357,618 $ 29,801
01/01/04 - 12/31/04 $ 370,510 $ 30,876
01/01/05 - 12/31/05 $ 383,402 $ 31,950
The company has not met its obligation on this commitment for the months of
March through May of 2001. As described elsewhere in this document, the company
relocated to a new facility in May and is in negotiation phases with the
Landlord as to a resolution pertaining to this lease.
11
Item 2. Management's Discussion and Analysis or Plan of Operation
This Report, in particular the "Management's Discussion and Analysis or of
Operation" section, contains forward-looking statements concerning our
expectations and anticipated operating results. All of these forward-looking
statements contained herein are intended to qualify for the safe harbor
protection provided by Section 21E of the Securities Exchange Act of 1934, as
amended. We caution the reader that numerous factors govern whether events
described by any forward-looking statement made by us will occur. Any one of
such factors could cause actual results to differ materially from those
projected by the forward-looking statements made in this Report. These
forward-looking statements include plans and objectives of management for future
operations, including plans and objectives relating to our products and future
economic performance.
Assumptions involve judgments with respect to, among other things, future
economic, competitive and market conditions, future business decisions, and the
results of the clinical trials and the time and money required to successfully
complete those trials, all of which are difficult or impossible to predict
accurately and many of which are beyond our control. Although we believe that
the assumptions underlying the forward-looking statements in this Report are
reasonable, any of these assumptions could prove inaccurate. Therefore, there
can be no assurance that the results contemplated in any of the forward-looking
statements will be realized. Budgeting and other management decisions are
subjective in many respects and are susceptible to interpretations and periodic
revision based on actual experience and business developments, the impact of
which may cause us to alter our marketing capital expenditure plans or other
budgets. This will affect our results of operations. In light of the significant
uncertainties inherent in the forward-looking statements, any such statement
should not be regarded as a representation by us or any other person that our
objectives or plans will be achieved.
The following discussion and analysis should be read in conjunction with the
Company's unaudited condensed consolidated financial statements and the notes
thereto contained elsewhere in this report. The discussion of these results
should not be construed to imply any conclusion that any condition or
circumstance discussed herein will necessarily continue in the future. Results
for the periods indicated are not necessarily indicative of the results that may
actually accrue for the year ending December 31, 2001. When used in this report,
the words "believes," "anticipates," "expects," and similar expressions are
intended to identify forward-looking statements. Those statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those that are modified by such statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
publicly release the results of any revisions to these forward-looking
statements that may be made to reflect events or circumstances after the date of
this report, or to reflect the occurrence of unanticipated events.
General
The Murdock Group develops or acquires assets and businesses, and then
focuses on increasing or creating equity, profit and cash flow in those assets
and businesses. This is a change in business direction from the previous
business plan implemented from 1983 until 1999, when the company business was
concentrated on career coaching and development. The company began to pursue
this new direction in 1999. The process was formalized in 2000 with a name
change from The Murdock Group Career Satisfaction Corporation to The Murdock
Group Holding Corporation.
The company's business now includes three primary areas of interest:
(1) career coaching and development, (2) Internet career development services
and products, and (3) real estate.
Career Coaching and Development. The career coaching business operates
in Salt Lake City. This business markets career-coaching and development
services directly to job seekers through radio, newspaper, yellow pages, and the
Internet. The services include full service coaching and job search assistance.
The job seeker pays the company for these services. The business differs from
the headhunter or employment agency where the employer pays the bill. As a part
of this business group, the company uses proprietary job search and coaching
technology developed over the past 18 years. Historically this business has
generated substantially all of the company's revenues. The business is unique,
difficult to copy, service intensive and generates regular and steady business.
The company has incurred significant losses to date developing its proprietary
job-search technology into a training system that can service a larger volume of
customers than its original one-on-one coaching. The Company completed
development of this system and has mass marketed it to the public since May
12
1998. With the completion of the new proprietary job-search technology training
system the Company has experienced a significant reduction in client
cancellations and discounts, and improved collection of client receivables.
Online Career Development Services and Products. We formed
CareerWebSource, Inc. (formerly MyJobSearch.com, Inc.) as a Delaware corporation
in June 1999. This Internet business provides job-search assistance, services,
products and information to job seekers and others. Revenue comes from two
principal sources. The first source of revenue is provided by the creation of
online career centers for high schools, libraries, and colleges. CareerWebSource
sells corporate partners a sponsorship on these career centers and builds the
corporate partner a proprietary local job board with a link to the high school,
library, or college sites that they sponsor.
The second revenue source for CareerWebSource is generated by the
MyJobSearch.com website that the company developed over the last two years.
MyJobSearch.com is a large online directory of job search resources with links
provided free for the job seeker. MyJobSearch.com also includes a recently
completed full service international job board. MyJobSearch.com sells postings
on this job board and thereby charges recruiters and corporations who are trying
to reach job seekers, for advertising on the site.
Real Estate. In September 1999, we formed a real estate group with the
intention of generating operating capital by acquiring real property, generally
undeveloped, in exchange for shares of the Murdock Group common stock, and
pledging the property as collateral for loans while seeking to sell the property
to developers at a profit. During 1999 and 2000, we acquired generally
undeveloped real property, in exchange for cash and shares of common stock. The
company used the property for development, lending, debt restructuring, and
resale.
During the year ended December 31, 2000, we acquired several parcels of
land and a commercial building, primarily with common stock. Several purchases
have also required cash down payments and the assumption of debt.
In Fall 2000, we decided to limit acquisitions of undeveloped property
and raw ground and to begin focusing on commercial buildings with intent to
improve cash flow and profit potential. The company acquired its first
commercial building in the fourth quarter of 2000 and is currently pursuing
other commercial real estate projects.
Since September 30, 2000, the company has reduced its holdings in raw
ground substantially and plans additional significant reductions of its interest
in undeveloped property and raw ground holdings in the second quarter of 2001.
The company expects that it will continue to incur significant losses in the
near term as it converts its real estate business model from raw ground
development to commercial building acquisition and management.
Restructuring
Primarily as a result of escalating interest expense associated with
debt incurred in the purchase of real property and to finance operations, we
incurred substantial operating losses in 1999 and 2000. The negative cash flow
from operations forced us to scale back our operations in 2000 and in September
2000 we developed and began implementing a corporate restructuring program. The
primary objectives of this program were (1) to reduce long-term debt; (2) to
eliminate short-term debt and to reduce interest rates on remaining short-term
debt obligations; (3) to refocus our operating efforts on the career development
and coaching market; and (4) to increase sales in our primary market, the career
development and coaching market.
Beginning in September 2000, we negotiated with our creditors holding
long and short-term debt. We also began reducing our overhead by reductions in
staff and personnel. Since September 2000, we have made significant changes in
our debt and equity structure as a result of this restructuring program.
At year-end 2000, as a result of the restructuring, we had reduced
liabilities by approximately 42% or $12 million compared to September 30, 2000,
and had cut operational costs significantly. As of March 31, 2001, we further
had reduced debt approximately $6.7 million. The total reduction in outstanding
liabilities of approximately $18.7 million to date represents a reduction in our
debt of approximately 78% from the September 2000 totals. The company expects to
complete most of the restructuring efforts by the end of the second quarter of
2001.
13
Results of Operations
Three months ended March 31, 2001 compared to three months ended March 31, 2000
Net service revenues were $376,469 during the three months ended March 31, 2001,
compared to $574,699 for the same period in the prior year. The decrease in
service revenue was primarily a result of tightening the credit policy and a
decrease in available dollars for advertising. In August 2000, we decided to
tighten our credit policy with a focus on selling to those customers with the
ability to pay for the services.
Direct cost of services decreased to $127,188 during the quarter ended March 31,
2001, compared to $133,843 during the quarter ended March 31, 2000. The decrease
in direct cost of services is relational to the volume of sales. We have focused
on costs associated with the delivery of the product to the client and reduced
those costs where possible. Gross profit as a percentage of net service revenues
was 66% during the first quarter of 2001, compared to 77% during the first
quarter of 2000.
General and administrative expenses, which include selling expense, decreased to
$554,683 during the three-month period ended March 31, 2001, compared to
$1,855,981 during the three months ended March 31, 2000. The decrease in general
and administrative expense is a result of down-sizing, decrease in advertising,
and reductions of other various administrative expenses.
Interest expense increased to $2,453,616 during the quarter ended March 31,
2001, compared to $1,817,330 during the same quarter in the prior year. The
increase in interest expense was a result of paying incentives to note holders
for the conversion of outstanding debt balances to stock, non-employee stock
options and certain costs incurred with obtaining financing. See "Liquidity and
Capital Resources." We have also commenced an aggressive program to reduce our
debt load by converting debt to equity.
Liquidity and Capital Resources
The cash provided by operations is insufficient to meet our operating costs and
expenses. We have suffered recurring losses from operations since inception in
1996 and as of March 31, 2001, we had an accumulated deficit of $48,886,512
compared to an accumulated deficit of $40,030,747 at December 31, 2000. The
accumulated deficit reflects losses associated with the development and startup
of operations and significant costs for research and development for our
propriety job-search technology and training system and costs associated with
the startup of our Real Estate Division and our internet subsidiary. We also
have experienced losses from the substantial interest expense associated with
the large amount of debt we had incurred, which carries high interest rates.
On March 31, 2001, we had a working capital deficit of approximately $7,902,881
compared to a deficit of $13,589,327 at December 31, 2000. This working capital
deficit is a result of funding operating losses primarily through short-term
borrowings. The interest rates associated with these short-term borrowings are
significantly higher than prime interest rates. Subsequent to March 31, 2001, we
restructured the overhead cost by relocating the business, reducing corporate
management, and cutting administrative support. We has also commenced an
aggressive program to further reduce outstanding debt through the conversion of
debt to equity by the issuance of common stock to creditors in satisfaction of
obligations.
We commenced an aggressive debt reduction and corporate restructuring program in
the quarter ended September 30, 2000. Since beginning this program, we have
issued a significant number of shares of common stock in full or partial
satisfaction of debt. We also have sold or released real property assets to
creditors in full or partial satisfaction of obligations owed to those
creditors. Cash flows from operations continue to be insufficient to cover all
our operating expenses. If we are not successful in completing its restructuring
program, eliminating the substantial debt load which carries higher than market
interest rates and punitive penalties for non-performance, and in acquiring
additional revenue generating assets or businesses, then we will be required to
seriously curtail or even cease operations.
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Part II - Other Information
RIDER A:
Item 1. Legal Matters
During the quarter ended March 31, 2001, we were party to litigation,
primarily involving defaults under long-term debt financing and trade payable
accounts. During the quarter ended March 31, 2001, we settled most of these
actions by entering into payment arrangements, granting or releasing interests
in real estate, or issuing shares of common stock.
We continue to be party to a lawsuit filed by Capital General
Corporation ("CGC"). CGC has asserted a deficiency on a loan balance in
connection with a foreclosure of two parcels of real estate. CGC is seeking
approximately $677,000 for the deficiency, punitive damages, and attorney fees.
We have answered the lawsuit and denied being indebted to CGC and we contend
that the principal owed was satisfied by the value of the two parcels of real
estate.
We are the subject of other legal matters, which we consider incidental
to our business activities. We do not believe these matters will have a material
impact on our consolidated financial condition or results of operations.
Item 2. Changes in Securities and Use of Proceeds
Issuance of Restricted Securities
During the period covered by this report we sold 1,494,658 shares to an
accredited investor for cash totaling $52,395.
In connection with this sale of restricted stock, we relied upon exemptions from
the registration requirements of the Securities Act of 1933, including the
exemptions afforded by Rule 506 and Section 4(2) under the Securities Act for
offers and sales of securities not involving any public offering. The purchaser
of these shares represented and warranted that it was acquiring the shares for
its own account and for investment and not with a view to the public resale or
distribution thereof. In addition, the purchaser was advised that the securities
issued in these transactions are restricted securities and that there are
significant restrictions on transferability applicable to the securities by
reason of federal and state securities laws and that the purchaser could not
sell or otherwise transfer the securities except in accordance with the
applicable securities laws.
In addition, the purchaser was provided with access to all material information
(and with the opportunity to ask questions and receive answers) regarding the
company and the securities, and the purchaser represented that it was an
accredited investor under Rule 501 of Regulation D.
A legend was placed on all certificates and instruments representing these
securities stating that the securities evidenced by such certificates or
instruments have not been registered under the Securities Act and setting forth
the restrictions on their transfer and sale.
RIDER B:
Item 3. Defaults Upon Senior Securities
During the quarter ended March 31, 2001, we were in default under the
terms of several loan and credit agreements. As a result of this default, we
became subject to increased interest and other penalties under the several loan
agreements. Although we were successful in negotiating settlements with many
creditors during the quarter, we continue to have short-term and long-term notes
totaling $5,917,820, with a weighted average interest rate of 16%. Of this
amount, approximately $4,606,066 is in default. While we continue to seek a
resolution of these matters with our creditors, we cannot assure you that we
will be successful in those efforts. We will require additional funding to
satisfy all of our obligations and at this time there is no agreement or
understanding in place that would provide that funding. If we continue default
of these amounts, the creditors may seek remedies that might include litigation
or involuntary bankruptcy proceedings, either of which we would vigorously
oppose.
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RIDER C:
Item 4. Submission of Matters to a Vote of Security Holders
In March 2001, we solicited the consent of our shareholders to amend
the articles of incorporation of the company to increase the number of shares
the company is authorized to issue 600,000,000 shares of common stock, $.001 par
value per share, and 25,000,000 shares of preferred stock, $.001 par valued per
share. The proposal was approved by a vote of 134,542,232 (53.6%) of the
outstanding shares. The majority also authorized the adoption of a new stock
option plan combining prior plans into the 2000 Murdock Group Stock Option Plan.
The Stock Option Plan, as amended, sets aside 75,000,000 shares of common stock
that may be issued under awards granted under the plan. A total of 15,400 shares
were voted against these proposals.
RIDER D:
Item 5. Other Information
During the quarter ended March 31, 2001, we continued our restructuring
that had commenced in September 2000. This process included the retirement or
refinancing of some of our liabilities and the settlement of disputes related to
some of these liabilities. In connection with the refinancing or payment of
obligations, we issued 3,200,000 shares of voting common stock for services and
to vendors. We also issued 54,839,178 shares to repay debt totaling $1,656,040
in principal and accrued interest, as well as 19,481,823 shares as partial
settlement of stock price guaranteel. During the quarter we also issued
53,763,791 shares to 18 creditors as payment of interest and other financing
charges in connection with the refinancing or repayment of long and short-term
obligations totaling $1,954,867. We also purchased 128,667 shares of
CareerWebSource common stock from two unrelated parties in exchange for
8,002,857 shares of our voting common stock.
Item 6. Exhibits and Reports on Form 8-K
(a) No exhibits are filed with this report.
(b) In January and in March 2001, the Company filed two reports on Form 8-K to
report on the progress of the Company's restructuring program.
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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.
The Murdock Group Holding Corporation
Dated this 30 day of May, 2001.
/s/ KC Holmes
- -----------------------------------------------
KC Holmes, CEO
/s/ Chet Nichols
- -----------------------------------------------
Chet Nichols, Controller (Principal Accounting Officer)
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