U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
|X| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-21419
CLICKNSETTLE.COM, INC.
(Name of small business issuer as specified in its charter)
Delaware 23-2753988
-------- ----------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
1010 Northern Boulevard
Great Neck, New York 11021
(Address of Principal Executive Offices)
(516) 829-4343
(Issuer's Telephone Number, Including Area Code)
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 report), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
As of November 7, 2001, 1,410,676 shares of common stock of the issuer were
outstanding.
Transitional small business disclosure format (check one): Yes __ No X
CLICKNSETTLE.COM, INC.
INDEX
PART I. FINANCIAL INFORMATION Page
----
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
Consolidated Balance Sheets at
September 30, 2001 and June 30, 2001 3
Consolidated Statements of Operations
for the three month periods ended
September 30, 2001 and 2000 4
Consolidated Statements of Changes in
Stockholders' Equity and Comprehensive
Loss for the three month periods ended
September 30, 2001 and 2000 5
Consolidated Statements of Cash Flows
for the three month periods ended
September 30, 2001 and 2000 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 2. Changes in Securities and Use of Proceeds 13
Item 6. Exhibits and Reports on Form 8-K 13
2
clickNsettle.com, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
2001 2001
---------------- ------------------
(unaudited) (derived from
audited financial
ASSETS statements)
CURRENT ASSETS
Cash and cash equivalents $ 2,336,561 $ 2,558,372
Marketable securities 251,468 402,807
Accounts receivable (net of allowance for doubtful
accounts of $140,000) 312,740 355,674
Prepaid expenses and other current assets 413,096 469,885
----------- -----------
Total current assets 3,313,865 3,786,738
FURNITURE AND EQUIPMENT - AT COST, less accumulated depreciation 286,610 309,242
OTHER ASSETS 42,975 91,452
----------- -----------
$ 3,643,450 $ 4,187,432
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 222,016 $ 179,196
Accrued liabilities 263,129 284,412
Accrued payroll and employee benefits 69,355 35,020
Deferred revenues 333,734 284,113
----------- -----------
Total current liabilities 888,234 782,741
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock - $.001 par value; 15,000,000 shares authorized; 1,450,259
shares issued; 1,416,109 and 1,444,676 shares
outstanding, respectively 1,450 1,450
Additional paid-in capital 10,109,870 10,109,385
Accumulated deficit (7,158,504) (6,687,254)
Accumulated other comprehensive loss (122,893) (6,135)
Less common stock in treasury at cost,
34,150 and 5,583 shares, respectively (74,707) (12,755)
----------- -----------
Total stockholders' equity 2,755,216 3,404,691
----------- -----------
$ 3,643,450 $ 4,187,432
=========== ===========
The accompanying notes are an integral part of these statements.
3
clickNsettle.com, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended September 30,
2001 2000
----------- -----------
Net revenues $ 822,619 $ 986,748
---------- ----------
Operating costs and expenses
Cost of services 204,862 216,281
Sales and marketing expenses 412,699 612,078
General and administrative expenses 683,033 772,578
---------- ----------
1,300,594 1,600,937
---------- ----------
Loss from operations (477,975) (614,189)
Other income
Investment income 2,247 84,560
Other income 4,478 3,042
---------- ----------
6,725 87,602
---------- ----------
Loss before income taxes (471,250) (526,587)
Income taxes - -
---------- ----------
NET LOSS $ (471,250) $ (526,587)
Preferred stock dividend and deemed dividend on
preferred stock for beneficial conversion - (28,582)
---------- ----------
Net loss attributable to common stockholders $ (471,250) $ (555,169)
========== ==========
Net loss per common share - basic and diluted $ (0.33) $ (0.40)
========== ==========
Weighted-average shares outstanding - basic and diluted 1,429,387 1,403,325
========== ==========
The accompanying notes are an integral part of these statements.
4
clickNsettle.com, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND
COMPREHENSIVE LOSS
Three months ended September 30, 2001 and 2000
Preferred stock Common stock Additional
--------------- ------------ paid-in
Shares Amount Shares Amount capital
-------------------------------------------------------------
Balances at June 30, 2000 1,850 $1,634,789 4,093,279 $4,093 $8,939,677
Compensation related to stock
options and warrants 22,880
Common shares issued upon
exercise of stock options 11,250 11 21,084
Common shares issued in exchange
for future advertising services,
net of issuance costs of $1,015 184,422 184 768,801
Common shares issued 18,662 19 77,895
Preferred stock dividend and
deemed dividend on preferred stock
for beneficial conversion 10,149
Common shares issued pursuant
to conversion of preferred stock (30) (26,674) 11,163 12 26,662
Net loss
Change in unrealized gain (loss)
on marketable securities
Comprehensive loss
--------------------------------------------------------
Balances at September 30, 2000 1,820 $1,618,264 4,318,776 $ 4,319 $ 9,856,999
========================================================
Balances at June 30, 2001 4,350,776 $ 4,351 $10,106,484
One-for-three reverse stock split
effectuated on August 20, 2001 (2,900,517) (2,901) 2,901
--------------------------------------------------------
1,450,259 1,450 10,109,385
Compensation related to stock options 485
Purchase of common shares for treasury
Net loss
Change in unrealized gain (loss)
on marketable securities
Comprehensive loss
--------------------------------------------------------
Balances at September 30, 2001 - - 1,450,259 $ 1,450 $ 10,109,870
========================================================
The accompanying notes are an integral part of these statements.
Accumulated
other Common Total Compre-
Accumulated comprehensive stock in stockholders hensive
deficit income (loss) treasury equity loss
-----------------------------------------------------------------------
Balances at June 30, 2000 ($4,326,628) $14,443 $6,266,374
Compensation related to stock
options and warrants 22,880
Common shares issued upon
exercise of stock options 21,095
Common shares issued in exchange
for future advertising services,
net of issuance costs of $1,015 768,985
Common shares issued 77,914
Preferred stock dividend and
deemed dividend on preferred stock
for beneficial conversion (28,582) (18,433)
Common shares issued pursuant
to conversion of preferred stock
Net loss (526,587) (526,587) $ (526,587)
Change in unrealized gain (loss)
on marketable securities (175,869) (175,869) (175,869)
----------
Comprehensive loss $ (702,456)
==========
-------------------------------------------------------
Balances at September 30, 2000 $ (4,881,797) $ (161,426) $ 6,436,359
=======================================================
Balances at June 30, 2001 $ (6,687,254) $ (6,135) $(12,755) $ 3,404,691
One-for-three reverse stock split
effectuated on August 20, 2001
-------------------------------------------------------
(6,687,254) (6,135) (12,755) 3,404,691
Compensation related to stock options 485
Purchase of common shares for treasury (61,952) (61,952)
Net loss (471,250) (471,250) $ (471,250)
Change in unrealized gain (loss)
on marketable securities (116,758) (116,758) (116,758)
----------
Comprehensive loss $ (588,008)
==========
--------------------------------------------------------
Balances at September 30, 2001 $ (7,158,504) $ (122,893) $ (74,707) $ 2,755,216
========================================================
The accompanying notes are an integral part of these statements.
5
clickNsettle.com, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended September 30,
2001 2000
------------ ------------
Cash flows from operating activities
Net loss $ (471,250) $ (526,587)
Adjustments to reconcile net loss to net cash used in operating
activities
Depreciation and amortization 25,967 25,821
Losses on sales of marketable securities 8,655 859
Write-down of marketable securities 10,125 -
Advertising in exchange for common stock 108,130 18,308
Compensation related to stock options 485 22,880
Changes in operating assets and liabilities
Decrease in accounts receivable 42,934 9,732
(Increase) in prepaid expenses and other current assets (2,864) (12,787)
(Increase) in other assets - (49,357)
Increase (decrease) in accounts payable and accrued liabilities 21,537 (92,285)
Increase in accrued payroll and employee benefits 34,335 58,164
Increase in deferred revenues 49,621 4,540
---------- -----------
Net cash used in operating activities (172,325) (540,712)
---------- -----------
Cash flows from investing activities
Purchases of marketable securities (22,385) (27,625)
Proceeds from sales of marketable securities 38,186 112,516
Purchases of furniture and equipment (3,335) (50,199)
---------- -----------
Net cash provided by investing activities 12,466 34,692
---------- -----------
Cash flows from financing activities
Issuance of common stock, net of issuance costs and proceeds
from exercise of stock options - 97,994
Purchase of treasury stock at cost (61,952) -
---------- -----------
Net cash (used in) provided by financing activities (61,952) 97,994
---------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (221,811) (408,026)
Cash and cash equivalents at beginning of period 2,558,372 5,976,439
---------- -----------
Cash and cash equivalents at end of period $2,336,561 $ 5,568,413
========== ===========
Supplemental disclosure of cash flow information:
Noncash financing activities
Preferred stock dividend and deemed dividend on preferred
stock for beneficial conversion $ - $ 28,582
Issuance of common stock in exchange for prepaid advertising - 770,000
Conversion of preferred stock to common stock - 26,674
The accompanying notes are an integral part of these statements.
6
CLICKNSETTLE.COM, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended September 30, 2001
(Unaudited)
1. The consolidated balance sheet as of September 30, 2001 and the related
consolidated statements of operations for the three month periods ended
September 30, 2001 and 2000 have been prepared by clickNsettle.com, Inc.,
including the accounts of its wholly-owned subsidiaries. In the opinion of
management, all adjustments necessary to present fairly the financial position
as of September 30, 2001 and for all periods presented, consisting of normal
recurring adjustments, have been made. Results of operations for the three month
period ended September 30, 2001 are not necessarily indicative of the operating
results expected for the full year.
These consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended June 30,
2001 included in the Company's Annual Report on Form 10-KSB. The accounting
policies used in preparing these consolidated financial statements are the same
as those described in the June 30, 2001 consolidated financial statements.
2. On August 20, 2001, the Company effected a 1-for-3 reverse stock split. All
references to number of shares and per share data in the consolidated financial
statements and accompanying notes have been restated. The par value of the
common stock remained unchanged at $.001 per share.
3. Basic earnings per share are based on the weighted average number of common
shares outstanding without consideration of potential common stock. Diluted
earnings per share are based on the weighted-average number of common and
potential common shares outstanding. The calculation takes into account the
shares that may be issued upon exercise of stock options and warrants and
conversion of preferred stock, reduced by the shares that may be repurchased
with the funds received from the exercise and conversion, based on the average
price during the period. Diluted earnings per share is the same as basic
earnings per share as potential common shares of 1,103,698 and 1,344,377 at
September 30, 2001 and 2000, respectively, would be antidilutive as the Company
incurred net losses for the three month periods ended September 30, 2001 and
2000.
4. The cost of advertising is expensed when the advertising takes place. The
Company incurred approximately $129,400 and $150,600 for advertising and
external public relations costs for the quarters ended September 30, 2001 and
2000, respectively. Of such totals, approximately $108,000 and $18,000 relate to
non-cash advertising charges in the first quarters of fiscal years 2002 and
2001, respectively. In connection with the August 2000 advertising agreement
with American Lawyer Media, Inc., the Company has agreed to purchase $250,000 in
additional advertising in the year subsequent to the initial two-year term if
certain agreed-upon criteria are not achieved on February 11, 2002.
5. On March 6, 2001, the Company received a letter from The Nasdaq SmallCap
Market that its common stock had failed to maintain a minimum bid price of $1.00
over the previous 30 consecutive trading days. As a result, the Company was
provided 90 calendar days, or until June 4, 2001, to regain compliance. As the
Company was unable to demonstrate compliance with this rule, the Company
requested and was granted a meeting on July 19, 2001 to seek continued listing
on The Nasdaq SmallCap Market. On September 27, 2001, Nasdaq implemented a
moratorium on the minimum bid price and market value of public float
requirements for continued listing on The Nasdaq SmallCap Market until January
2, 2002. On October 2,
7
2001, the Company received a determination from the Nasdaq Listing
Qualifications Panel to continue the listing of the Company's common stock and
the hearing file has been closed.
6. On March 23, 2001, the Company extended its March 1998 purchase plan (the
"Plan"), pursuant to which the number of shares of common stock of the Company
eligible for purchase under the Plan was increased from 200,000 to an aggregate
of 266,667 shares. The Plan shall expire on the earlier of all of the shares
being purchased or March 23, 2002, provided, however, that the Plan may be
discontinued at any time by the Company. As of September 30, 2001, the Company
purchased 34,150 shares under the Plan for an aggregate cost of $74,707.
7. In July 2001, the Company signed a letter of intent to acquire E-Vue, Inc., a
development stage company engaged in developing next-generation end-to-end
solutions for multimedia delivery over broadband and/or wireless networks based
on the MPEG-4 standard and associated compliant technologies. The proposed
purchase price under the letter of intent consists of a combination of common
stock and convertible preferred stock to be issued by the Company depending on
certain financing conditions on the part of E-Vue, Inc. The letter of intent
provided for an exclusivity period for both parties until October 7, 2001, which
has now expired. In the event either party breaches the agreement, the
non-breaching party is to be reimbursed for actual costs incurred up to a
maximum of $100,000 and is entitled to a $100,000 breakup fee. The acquisition,
which will require shareholder approval, was initially expected to close in
October 2001. However, the Nasdaq Listing Qualifications Panel informed the
Company that the proposed merger will result in a change of control for purposes
of Nasdaq Marketplace rules, and therefore the combined entities would be
required to evidence compliance with all requirements for initial listing on The
Nasdaq SmallCap Market immediately upon consummation of the transaction. As a
result, it is unlikely that the parties will complete this transaction.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
From time to time, including in this quarterly report on Form 10-QSB,
clickNsettle.com, Inc. (formerly NAM Corporation) (the Company or we) may
publish forward-looking statements relating to such matters as anticipated
financial performance, business prospects, future operations, new products,
research and development activities and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. In order to comply with the terms of the safe harbor, we note that a
variety of factors could cause our actual results to differ materially from the
anticipated results or other expectations expressed in our forward-looking
statements. The risks and uncertainties that may affect the operations,
performance, development and results of our business include, without
limitation, the following: changes in the insurance and legal industries; our
inability to retain current or new hearing officers; changes in the public court
systems; and the degree and timing of the market's acceptance of our web site
and in-person and video-conferenced arbitration and mediation programs.
General
We provide alternative dispute resolution services, or ADR services, to
insurance companies, law firms, corporations and municipalities, on an in-person
basis, via video conferencing and on the Internet through our clickNsettle.com
web site. We focus the majority of our marketing efforts on developing and
expanding relationships with these entities, which we believe are some of the
largest consumers of ADR services. We believe that with our global roster of
qualified hearing officers, video conferencing capabilities, knowledge of
dispute resolution, reputation within the corporate and legal communities and
Internet-based dispute resolution services, we are uniquely positioned to
provide a comprehensive web-enabled total solution to disputing parties
worldwide.
We currently operate from locations in New York and Massachusetts.
Our objective is to become the leading global provider of dispute
resolution services by providing a "total solution" for our clients; by offering
one-stop shopping for anyone involved in any type of dispute, anywhere in the
world; and by providing this service quicker, more economically and more
efficiently than previously possible. We intend to achieve this goal by
employing the following strategies: (1) marketing our comprehensive suite of
web-enabled dispute resolution tools which are designed to attract a larger
customer base on a global scale with lower incremental costs; (2) positioning
clickNsettle.com as a necessary component of e-commerce and international
transactions so as to provide a mechanism for the resolution of any potential
dispute, should one occur, among parties who may be located in geographically
diverse areas; (3) focusing our advertising campaign towards building brand
recognition; (4) accelerating efforts to secure exclusive relationships with
corporations and law firms in order to obtain contracts on an international
basis by capitalizing on our market position; (5) continuing to explore
strategic alliances with business entities that have the ability to promote
clickNsettle.com; (6) becoming a primary provider of commercial, international,
insurance and intellectual property dispute resolution; and (7) exploiting
revenue steams driven by an investment in technology, software, systems and
intellectual property.
We believe that the current economic slowdown is an environment which
should encourage the use of our services as more business entities are focusing
on cost saving measures given the tremendous expense related to traditional
litigation versus our quicker, more efficient dispute resolution process.
9
We have and may continue to incur net losses in the future as a result
of (a) continuing development and other costs associated with our web-based
software initiatives for new products and (b) our advertising campaign. Although
we are actively promoting our services, there can be no assurance that the
revenues to be realized therefrom will exceed the expenses to be incurred.
Additionally, our advertising campaign will continue through the first quarter
of fiscal year 2003. In August 2000, we signed an agreement with American Lawyer
Media, Inc., the nation's leading legal journalism and information company, to
provide $1,000,000 of advertising and promotional opportunities in their
national and regional publications over a two-year period in exchange for 61,474
shares of our common stock (as adjusted for the 1-for-3 reverse stock split
effectuated on August 20, 2001). We believe that targeting our advertising to
the legal community will continue to increase awareness of our comprehensive
suite of dispute resolution services. However, there can be no assurance that
this effort will result in increased revenues.
First Quarter Ended September 30, 2001 Compared to First Quarter Ended September
30, 2000
Revenues. Revenues decreased 16.6% to $822,619 for the first quarter
ended September 30, 2001 from $986,748 for the comparable prior period. The
decrease in revenues is primarily attributable to a significant decline in the
number of in-person hearings conducted in the New York metropolitan area during
the month of September. As New York is our primary market, the terrorist attacks
on September 11, 2001 adversely impacted our business as many of the hearings
scheduled for the remainder of September had to be adjourned. During this same
period, there was a decline in the number of in-person hearings conducted at our
satellite offices as a general malaise was experienced in the business
community. The insurance industry, which was particularly hard hit by the recent
events, represents a major portion of our clientele. As part of our migration
towards centralizing operations through the utilization of our web platform, we
began migrating our marketing efforts toward fewer but more efficient primary
customer service centers and national account arrangements, as opposed to the
continuation of running smaller and less efficient regional office locations. We
believe that building on the present platform is the appropriate strategy to
enhance operating results. Also, in the prior year quarter, revenue of $60,000
was generated from a unique, non-recurring video-conferencing contract that was
fulfilled in the prior year. Offsetting these declines was a 10% price increase
in our administrative fees effective for services commenced in the fourth
quarter of fiscal 2001 or thereafter; a rise in the average dollars earned per
in-person hearing and higher fees earned from commercial cases.
Cost of Services. Cost of services decreased 5.3% to $204,862 for the
first quarter ended September 30, 2001 from $216,281 for the first quarter ended
September 30, 2000. Additionally, the cost of services as a percentage of
revenues increased to approximately 25% in the first quarter of fiscal year 2002
from 22% in the first quarter of fiscal year 2001. The increase is partially
attributed to the recognition of revenue during the quarter ended September 30,
2000 from a videoconferencing contract in which the use of hearing officers was
not needed. The ratio of cost of services to revenues will fluctuate based on
the number of hours per case and our ability (or inability) to take advantage of
volume arrangements with hearing officers which usually lower the cost per case.
Additionally, although the direct cost of services for commercial cases tends to
be higher as a percentage of revenue, profit thereon is typically greater. These
cases are apt to be longer in duration and require less sales and administrative
effort on a per case basis.
Sales and Marketing. Sales and marketing costs decreased 32.6% to
$412,699 for the first quarter ended September 30, 2001 from $612,078 for the
first quarter ended September 30, 2000. Sales and marketing costs as a
percentage of revenues decreased to 50% in the first quarter of fiscal year 2002
from 62% in the first quarter of fiscal year 2001. Most of the decrease
(approximately $170,000) relates to employee costs and related items (including
benefits and payroll taxes) and travel and entertainment expenses. The
consolidation of our offerings into a one-stop, comprehensive suite of
web-enabled dispute resolution tools enabled us to streamline sales personnel
and related costs
10
including travel and entertainment expenses. Additionally, advertising and trade
show costs declined by approximately $30,000 from the first quarter of fiscal
year 2001 to the first quarter of fiscal year 2002 as we reduced our cash
expenditures in these areas. Instead, we focused our advertising campaign around
our agreement with American Lawyer Media, Inc., the nation's leading legal
journalism and information company, which provides us with $1,000,000 of
advertising and promotional opportunities in their national and regional
publications over a two-year period that commenced August 2000 in exchange for
our common stock. The related non-cash amount expensed for the quarters ended
September 30, 2000 and 2001 approximated $18,000 and $108,000, respectively.
Additional non-cash charges for print advertising relating to this agreement
will be incurred during the remainder of fiscal year 2002 and into the first
quarter of fiscal year 2003 and, in total, will approximate $372,000. Due to the
economic slowdown, many businesses are decreasing the level of advertising and
therefore, as commercial clutter lessens, we believe our targeted campaign
should be more prominent and receive more attention.
General and Administrative. General and administrative costs decreased
11.6% to $683,033 for the first quarter ended September 30, 2001 from $772,578
for the first quarter ended September 30, 2000. A portion of the decrease
(approximately $54,000) relates to professional fees for various consulting
services, a majority of which related to market research, systems evaluations
and investor-relations projects which were completed by the end of the second
quarter of fiscal year 2001. These initiatives were undertaken in order to
position us for future growth and to enhance operating efficiencies. Secondly,
we incurred approximately $38,000 in one-time costs to promote our company to
investors overseas in the prior year period. As part of an effort to reduce
overhead, we reduced expenditures for administrative personnel, seminars, auto
expenses and telephone that approximated $66,000. Offsetting these declines was
an increase in legal fees of approximately $57,000 related to mergers and
acquisitions activity. General and administrative costs as a percentage of
revenues increased to 83% for the first quarter of fiscal year 2002 from 78% for
the first quarter of fiscal year 2001.
Other Income. Other income decreased by $80,877 for the first quarter
ended September 30, 2001 from the first quarter ended September 30, 2000. Other
income is composed primarily of investment income and realized gains (losses)
generated from investments. Realized losses (which includes write-downs for
other than temporary declines in the value of marketable securities)
approximated $900 in the first quarter of fiscal year 2001 versus $18,800 in the
first quarter of fiscal year 2002. Additionally, interest income generated from
investments in money market funds declined by approximately $64,000 due to lower
invested balances and a decline in the prevailing interest rates between the two
periods.
Income Taxes. Tax benefits resulting from net losses incurred for the
periods ended September 30, 2001 and 2000 were not recognized as we recorded a
full valuation allowance against the net operating loss carryforwards during the
periods.
Net Loss. For the three months ended September 30, 2001, we had a net
loss of $471,250 as compared to a net loss of $526,587 for the three months
ended September 30, 2000. The loss declined, despite a lower level of revenue
and interest income, as our efforts to streamline and centralize operations
through the utilization of our web platform enabled us to reduce sales and
administrative costs.
Liquidity and Capital Resources
At September 30, 2001, the Company had a working capital surplus of
$2,425,631 compared to $3,003,997 at June 30, 2001. The decrease in working
capital occurred primarily as a result of the loss from operations.
11
Net cash used in operating activities was $172,325 for the three months
ended September 30, 2001 versus $540,712 in the prior comparable period. Cash
used in operating activities declined due to a reduction in the loss from
operations as well as an increase in non-cash charges such as advertising and
write-downs of securities and changes in operating assets and liabilities.
Net cash provided by investing activities was $12,466 for the three
months ended September 30, 2001 versus $34,692 in the comparable prior period.
The change in cash from investing activities was primarily due to a lower level
of sales of securities offset by a lower level of purchases of fixed assets.
Net cash used in financing activities was $61,952 for the three months
ended September 30, 2001 versus cash provided by financing activities of $97,994
in the prior comparable period. In the current quarter, we purchased 28,567
shares of our common stock for an aggregate cost of $61,952. In the prior year
quarter, we received net proceeds from the issuance of 6,221 shares at a price
of $12.525 per share (as adjusted for the 1-for-3 reverse stock split
effectuated on August 20, 2001) and also received proceeds of $21,000 from the
exercise of stock options.
We anticipate that cash flows, together with funds received in
connection with the issuance of common stock in prior fiscal years, will be
sufficient to fund our operations for the next year. Additionally, under an
Equity Line of Credit Agreement, we have the right, until February 15, 2003, to
require that the investor purchase between $500,000 and $7,000,000 of our common
stock. The availability to use this line is limited based on the closing bid
price of our common stock and the average trading volume of such stock in a
thirty-day period. If the closing bid price and average trading volume are below
a defined minimum, the maximum amount available at that point in time will be
$250,000. There is also a minimum of 15 days between each request for
investment.
Acquisition of E-Vue, Inc.
On July 9, 2001, we signed a letter of intent to acquire E-Vue, Inc., a
development stage company engaged in developing next-generation end-to-end
solutions for multimedia delivery over broadband and/or wireless networks based
on the MPEG-4 standard and associated compliant technologies. The proposed
purchase price under the letter of intent consists of a combination of common
stock and convertible preferred stock to be issued by us depending on certain
financing conditions on the part of E-Vue, Inc. The letter of intent provided
for an exclusivity period for both parties until October 7, 2001, which has now
expired. In the event either party breaches the agreement, the non-breaching
party is to be reimbursed for actual costs incurred up to a maximum of $100,000
and is entitled to a $100,000 break up fee. The acquisition, which will require
shareholder approval, was initially expected to close in October 2001. However,
due to the upheaval in the financial markets in response to recent events, the
expected closing date of the acquisition was delayed. In addition, the Nasdaq
Listing Qualifications Panel informed us that the proposed merger will result in
a change of control for purposes of Nasdaq Marketplace rules, and therefore the
combined entities would be required to evidence compliance with all requirements
for initial listing on The Nasdaq SmallCap Market immediately upon consummation
of the transaction. As a result, it is unlikely that the parties will complete
this transaction.
12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities and Use of Proceeds.
On August 20, 2001, the Company effected a 1-for-3 reverse stock
split. All references to number of shares and per share data in the
consolidated financial statements and accompanying notes have been
restated, except with respect to certain redeemable warrants which
were adjusted to reflect the reverse stock split. After the reverse
stock split, in order to obtain one share of common stock, the warrant
holder must exercise three warrants and pay an aggregate of $18 in
cash, subject to adjustment, at any time from issuance until November
13, 2001. The par value of the common stock remained unchanged at
$.001 per share.
Item 3. Defaults upon Senior Securities.
Not applicable.
Item 4. Submission of matters to a Vote of Security Holders.
None.
Item 5. Other information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit
Number Description of Document
3.1 Certificate of Incorporation, as amended (1)
3.1 (b) Certificate of Designation of Series A Exchangeable Preferred
Stock (6)
3.1 (c) Certificate of Correction of Certificate of Designation of Series A
Exchangeable Preferred Stock (7)
3.1 (d) Certificate of Amendment of Certificate of Incorporation (9)
3.1 (e) Certificate of Amendment of Certificate of Incorporation, as
amended (12)
3.2 By-Laws of the Company, as amended (4)
4.1 Stock Purchase Agreement dated May 10, 2000 (8)
4.2 Stock Purchase Warrant dated May 10, 2000 (8)
10.1 1996 Stock Option Plan, amended and restated (4)
10.2 Employment Agreement between Company and Roy Israel (3)
10.2.1 Amendment to Employment Agreement between Company and Roy Israel (4)
10.5 Employment Agreement between Company and Patricia Giuliani-Rheaume (2)
10.7 Lease Agreement for Great Neck, New York facility (1)
10.7.1 Amendment to Lease Agreement for Great Neck, New York facility (5)
10.7.2 Second Amendment to Lease Agreement for Great Neck, New York
facility (11)
10.8 Exchangeable Preferred Stock and Warrants Purchase Agreement (6)
10.9 Preferred Stock Registration Rights Agreement (6)
13
10.11 Private Equity Line of Credit Agreement between Moldbury Holdings
and Company (6)
10.12 Private Equity Line of Credit Registration Rights Agreement (6)
10.13 Stock Purchase Warrant for Moldbury Holdings Limited (6)
10.14 Advertising Agreement dated August 11, 2000 (10)
(1) Incorporated herein in its entirety by reference to the Company's
Registration Statement on Form SB-2, Registration No. 333-9493, as
filed with the Securities and Exchange Commission on August 2, 1996.
(2) Incorporated herein in its entirety by reference to the Company's 1997
Annual Report on Form 10-KSB.
(3) Incorporated herein in its entirety by reference to the Company's
Quarterly Report on Form 10-QSB for the quarter ended September 30,
1997.
(4) Incorporated herein in its entirety by reference to the Company's 1998
Annual Report on Form 10-KSB.
(5) Incorporated herein in its entirety by reference to the Company's 1999
Annual Report on Form 10-KSB.
(6) Incorporated herein in its entirety by reference to the Company's SB-2
filed on March 28, 2000.
(7) Incorporated herein in its entirety by reference to the Company's SB-2A
filed on April 21, 2000.
(8) Incorporated herein in its entirety by reference to the Company's Form
8-K filed on May 17, 2000.
(9) Incorporated herein in its entirety by reference to the Company's Form
8-K filed on June 21, 2000.
(10) Incorporated herein in its entirety by reference to the Company's Form
8-K filed on August 24, 2000.
(11) Incorporated herein in its entirety by reference to the Company's 2000
Annual Report on Form 10-KSB.
(12) Incorporated herein in its entirety by reference to the Company's 2001
Annual Report on Form 10-KSB.
(b) Reports on Form 8-K. None.
14
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLICKNSETTLE.COM, INC.
Date: November 12, 2001 By: /s/ Roy Israel
-------------------------------
Roy Israel, President and CEO
Date: November 12, 2001 By: /s/ Patricia A. Giuliani-Rheaume
---------------------------------
Patricia A. Giuliani-Rheaume,
Vice President, Treasurer and CFO
15