-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VBX6F2amIq7rW5MdCR5biAbeqCFWdzrMSBVggv89f7qqBwK5EDQ5KMpZImjZw6gA Ps1tpyqOgkOjLyY4efvLkg== 0000950112-96-001569.txt : 19960518 0000950112-96-001569.hdr.sgml : 19960518 ACCESSION NUMBER: 0000950112-96-001569 CONFORMED SUBMISSION TYPE: SB-2/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19960516 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLISHING CO OF NORTH AMERICA INC CENTRAL INDEX KEY: 0001010615 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PUBLISHING [2741] IRS NUMBER: 593203301 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-02306 FILM NUMBER: 96568346 BUSINESS ADDRESS: STREET 1: 577 DELTONA BLVD STREET 2: 2ND FL CITY: DELTONA STATE: FL ZIP: 32725 BUSINESS PHONE: 4078603000 SB-2/A 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 1996 REGISTRATION NO. 333-2306 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- AMENDMENT NO. 3 TO REGISTRATION STATEMENT ON FORM SB-2 UNDER THE SECURITIES ACT OF 1933 ------------------- THE PUBLISHING COMPANY OF NORTH AMERICA, INC. (Name of Small Business Issuer in its Charter) FLORIDA 2741 59-3203301 (State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.)
------------------- 577 DELTONA BLVD., 2ND FLOOR DELTONA, FLORIDA 32725 (407) 860-3000 (Address and telephone number of principal executive offices) ------------------- 577 DELTONA BLVD., 2ND FLOOR DELTONA, FLORIDA 32725 (Address of principal place of business or intended principal place of business) ------------------- MR. PETER S. BALISE 577 DELTONA BLVD., 2ND FLOOR DELTONA, FLORIDA 32725 (407) 860-3000 (Name, address and telephone number of agent for service) ------------------- PLEASE SEND A COPY OF ALL COMMUNICATIONS TO: MICHAEL D. HARRIS, ESQ. JOEL MAYERSOHN, ESQ. Cohen, Chernay, Norris, Atlas, Pearlman, Trop Weinberger & Harris & Borkson, P.A. 712 U.S. Highway One, 4th Floor 200 East Las Olas Blvd. North Palm Beach, FL 33408 Ft. Lauderdale, FL 33301 (407) 844-3600 (305) 766-7816
------------------- APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. X If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CROSS REFERENCE SHEET
FORM SB-2 ITEM NUMBERS AND CAPTION HEADING IN PROSPECTUS - ------------------------------------------------ ------------------------------------------ 1. Front of Registration Statement and Outside Front Cover of Prospectus....... Cover Page of Form SB-2 and of Prospectus 2. Inside Front and Outside Back Cover Pages of Prospectus............................. Inside Front and Outside Back Cover Pages of Prospectus 3. Summary Information and Risk Factors...... Prospectus Summary and Risk Factors 4. Use of Proceeds........................... Use of Proceeds 5. Determination of Offering Price........... Cover Page of Prospectus and Description of Securities 6. Dilution.................................. Dilution 7. Selling Security Holders.................. Concurrent Offering 8. Plan of Distribution...................... Cover Page of Prospectus and Underwriting 9. Legal Proceedings......................... Not Applicable 10. Directors, Executive Officers, Promoters and Control Persons..................... Management 11. Security Ownership of Certain Beneficial Owners and Management..................... Principal Shareholders 12. Description of Securities................. Description of Securities 13. Interest of Named Experts and Counsel..... Legal Matters and Financial Statements 14. Disclosure of Commission Position on Indemnification for Securities Act Liabilities............................... Management and Part II 15. Organization Within Last Five Years....... Principal Shareholders 16. Description of Business................... Risk Factors, Business and Subchapter S Distributions 17. Management's Discussion and Analysis or Plan of Operation......................... Management's Discussion and Analysis of Results of Operations and Financial Condition 18. Description of Property................... Business 19. Certain Relationships and Related Transactions.............................. Certain Transactions 20. Market for Common Equity and Related Stockholder Matters....................... Description of Securities 21. Executive Compensation.................... Management 22. Financial Statements...................... Financial Statements 23. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure................................ Not Applicable 24. Indemnification of Directors and Officers.................................. Part II 25. Other Expenses of Issuance and Distribution.............................. Part II 26. Recent Sales of Unregistered Securities... Part II 27. Exhibits.................................. Part II 28. Undertakings.............................. Part II
EXPLANATORY NOTE This Registration Statement covers the registration of (i) up to 1,150,000 shares of Common Stock, no par value ("Common Stock"), including shares of Common Stock to cover over-allotments of The Publishing Company of North America, Inc. (the "Company"), a Florida corporation, for sale by the Company in an underwritten public offering, and (ii) an additional 12,500 shares of Common Stock (the "Selling Shareholders' Stock") for the sale by the holders thereof (the "Selling Shareholders"), all for resale from time to time by the Selling Shareholders subject to the contractual restriction that the Selling Shareholders may not sell the Selling Shareholders' Stock for a specified period after the closing of the underwritten offering. The complete Prospectus relating to the underwritten offering follows immediately after this Explanatory Note. Following the Prospectus for the underwritten offering are pages of the Prospectus relating solely to the Selling Shareholders' Stock, including alternative front and back cover pages and sections entitled "Concurrent Public Offering", "Plan of Distribution", "Selling Shareholders" and "Shares Eligible for Future Sale" to be used in lieu of the sections entitled "Concurrent Offering", "Shares Eligible for Future Sale" and "Underwriting" in the Prospectus relating to the underwritten offering. Certain sections of the Prospectus for the underwritten offering will not be used in the Prospectus relating to the Selling Shareholders' Stock such as "Use of Proceeds" and "Dilution." PROSPECTUS SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED MAY 16, 1996 THE PUBLISHING COMPANY OF NORTH AMERICA, INC. 1,000,000 SHARES OF COMMON STOCK The Publishing Company of North America, Inc. (the "Company") is hereby offering 1,000,000 shares of its common stock ("Common Stock"), no par value. Prior to this offering, there has been no public market for the Common Stock, and no assurances can be given that any such market will develop upon completion of this offering. It is currently estimated that the initial public offering price of the Common Stock will be between $5.00 and $6.00 per share and will be determined by negotiation between the Company and Laidlaw Equities, Inc., as representative of the several underwriters (the "Representative"). For information regarding the factors considered in determining the initial public offering price of the Common Stock, see "Risk Factors" and "Underwriting." The Company has been approved for quotation of the Common Stock on the National Association of Securities Dealers Automated Quotation National Market ("NMS") under the proposed symbol PCNA. Concurrently with this offering, the Company has also registered 12,500 shares of Common Stock acquired by five shareholders (the "Selling Shareholders") in connection with the Company's March 1996 private placement (the "Private Placement"). The Underwriter is not offering any of these shares in this offering. The Company will not receive any of the proceeds from the sale of the 12,500 shares of Common Stock by the Selling Shareholders. See "Concurrent Offering" and "Certain Transactions." ------------------- THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS" CONTAINED AT PAGES 7--11 OF THIS PROSPECTUS AND "DILUTION." ------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO PUBLIC AND COMMISSIONS(1) COMPANY(2) Per Share.......................... $ $ $ Total(3)........................... $ $ $
(1) Does not include additional consideration to be received by the Representative in the form of (i) a non-accountable expense allowance equal to 3% of the gross offering proceeds (of which $50,000 has been paid); and (ii) any value attributable to warrants (the "Representative's Warrants") entitling the Representative to purchase up to 95,000 shares of Common Stock at a price per share equal to 120% of the initial public offering price, exercisable for a period of four years commencing 12 months after the date of this Prospectus. In addition, the Company has agreed to indemnify the Underwriter against certain liabilities under the Securities Act of 1933, as amended (the "Securities Act"). See "Underwriting." (2) Before deducting expenses of the offering payable by the Company (including the Representative's non-accountable expense allowance) estimated at $475,000 . ($499,750 if the over-allotment option granted by the Company described below is exercised in full.) (3) The Company has granted the Underwriters an option exercisable within 45 days of the date of this Prospectus (the "Over-Allotment Option") to purchase up to 150,000 additional shares of Common Stock on the same terms as set forth above solely to cover over-allotments, if any. If the Over-Allotment Option is exercised in full, the total Price to Public, Underwriting Discounts and Commissions and the Proceeds will be $6,325,000, $632,500 and $5,692,500, respectively. See "Underwriting." The shares of Common Stock are being offered on a "firm commitment" basis by the Underwriters when, as and if delivered by the Underwriters, and subject to their right to reject orders in whole or in part and to certain other conditions. It is expected that delivery of the certificates representing the shares of Common Stock will be made at the offices of Laidlaw Equities, Inc., 100 Park Avenue, New York, New York, 10017, on or about May __, 1996. LAIDLAW EQUITIES, INC. The date of this Prospectus is May __, 1996 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE. [PHOTO] [PHOTO] [PHOTO] [PHOTO] [PHOTO] [PHOTO] A sample of the directories published by the Publishing Company of North America, Inc. [Artwork] The Company will furnish its shareholders with annual reports containing audited financial statements and such other periodic reports as the Company may from time to time deem appropriate or as may be required by law. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NMS, SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the more detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in the Prospectus does not give effect to the exercise of the Over- Allotment Option and the Representative's Warrants. Except where otherwise indicated, all share and per share data and information included in this Prospectus relating to the number of shares of Common Stock give retroactive effect to a March 1996 recapitalization in which a 29,250 to 1 stock split was effected. Except where otherwise indicated, information relating to the number of shares of Common Stock also gives effect to the future issuance of 3,000 shares of Common Stock and 15,000 options to each of Matt Butler and John D. McKey, Jr., Esq., proposed directors of the Company. Unless otherwise indicated, all references in this Prospectus to the term "Company" shall mean The Publishing Company of North America, Inc., a Florida corporation. THE COMPANY The Company is an integrated full service provider of specialty publishing for bar associations, focusing on print directories and Internet services. The Company's principal product is the publication of city and county bar association print directories throughout the United States. In March 1996, the Company published its first state bar directory which was for the New Hampshire Bar Association. Bar association directories contain a complete listing of member attorneys and bar executives along with their addresses and telephone numbers. They often also contain court information and specialized local information which attorneys may need in order to carry on their business. In 1996, the Company expanded its business to include electronic publishing on the Internet. In January 1996, the Company established its first site on the World Wide Web (the "Web") of the Internet which is for the Atlanta Bar Association. More recently, the Company has reached understandings to establish a separate Internet presence for the Boston Bar Association, the Bar Association of the District of Columbia, the Cleveland Bar Association, the Orange County Bar Association, Inc. (Orlando, Florida), the Bar Association of Erie County (Buffalo, New York) and the Onondaga County Bar Association (Syracuse, New York). The Company publishes its print and electronic directories on a turnkey basis. As a turnkey publisher, the Company assumes all costs of publication, including design, printing and binding for its print directories as well as providing a Web site for its electronic directories. The Company relies upon the sale of advertising to generate its principal revenues. Both the print bar directories and Web sites are provided at no cost to bar associations. Since inception, the Company has increased the number of print directories it has published from 16 directories in 1994 to 33 in 1995. In the first quarter of 1996, the Company published 14 directories and generated net sales of approximately $979,000, compared to three directories and net sales of approximately $89,000 for the first quarter of 1995. The Company's senior management has approximately 20 years of combined experience in publishing print specialty directories. This experience, the high quality of the print directories published by the Company and the Company's commitment to client service have contributed to the Company's pattern of growth. In December 1995, the Company became the publisher of the directory for the National Association of Bar Executives ("NABE"), which is affiliated with the American Bar Association. NABE consists of executives from many leading bar associations at the state, county and local levels. NABE members include executives from all 50 state bar associations and many city bar associations such as Atlanta, Boston, Chicago, Dallas, Denver, Detroit, the District of Columbia, Houston, Los Angeles, New Orleans, New York, Philadelphia, San Francisco and St. Louis. As the publisher of the NABE 3 directory, the Company believes that it has an important competitive advantage in the marketing of bar directories to NABE members. The Company's primary strategy is to use the proceeds of this offering to further penetrate the bar association directory business through an expanded marketing program, specifically targeting larger bar associations and establishing a program to secure long-term contracts to publish bar association print and electronic directories. In addition, the Company will expand its Internet services. The Company intends to capitalize on its position as a publisher of bar directories to cross-market its Internet services to bar associations and attorneys through the sale of specialty listings and home pages. The Company is a Florida corporation incorporated in 1993. The Company's offices are located at 577 Deltona Blvd., Deltona, Florida, 32725, and its telephone number is (407) 860-3000. THE OFFERING
Common Stock Offered......................... 1,000,000 shares Common Stock Outstanding: Before Offering............................ 2,961,000 shares(1) After Offering............................. 3,961,000 shares(1),(2) Risk Factors................................. The Common Stock offered hereby involves a high degree of risk and immediate and substantial dilution. See "Risk Factors" and "Dilution." Use of Proceeds.............................. Expansion of Internet services; repayment of the notes (the "Bridge Notes") issued in the Private Placement; establishment of a program to secure long-term agreements to publish bar association print and electronic directories; purchase of equipment; expansion of sales and marketing; potential acquisitions; and working capital. See "Use of Proceeds" and "Certain Transactions." Proposed National Market System Symbol for Common Stock............................... PCNA
- ------------ (1) An aggregate of 2,932,500 shares of Common Stock owned by the Company's executive officers, directors, proposed directors and certain shareholders (including 17,500 shares acquired in the Private Placement) and 12,500 shares owned by persons participating in the Private Placement are subject to lock-up agreements with the Underwriter and may not be sold publicly without the consent of the Underwriter until , 1997 (13 months from the date of this Prospectus) and , 1996 (90 days from the date of this Prospectus), respectively. See "Principal Shareholders." (2) Does not include (i) 95,000 shares of Common Stock reserved for issuance in the event of the exercise of the Representative's Warrants, (ii) 500,000 shares of Common Stock reserved for issuance under the Company's 1996 Stock Plan (the "Plan") of which unvested 108,500 options exercisable at $5.50 per share (the initial public offering price) have been granted. See "Management--1996 Stock Plan" and "Underwriting." 4 SUMMARY FINANCIAL INFORMATION The following table sets forth certain summary financial information concerning the Company and is qualified by reference to the financial statements and notes thereto included elsewhere in this Prospectus.
YEAR ENDED QUARTER ENDED DECEMBER 31, MARCH 31, 1996 ----------------------- -------------------- 1994 1995 1995 1996 --------- ---------- -------- -------- STATEMENTS OF INCOME DATA: Net sales...................................... $ 465,936 $1,949,266 $ 89,234 $978,677 Income (loss) from operations.................. 42,349 565,549 (52,847) 326,858 Loss on uncollectible note(1).................. (100,553) -- -- -- Net income (loss).............................. $ (55,309) $ 580,246 $(51,767) $147,750 --------- ---------- -------- -------- --------- ---------- -------- -------- Pro forma data(2): Income (loss) before provision for income taxes.......................................... $ (55,309) $ 580,246 $(51,767) $313,860 Provision (benefit) for income taxes(3)........ 11,850 218,700 (19,480) 118,000 --------- ---------- -------- -------- Pro forma net income (loss).................... $ (67,159) $ 361,546 $(32,287) $195,860 --------- ---------- -------- -------- --------- ---------- -------- -------- Pro forma net income (loss) per share(4)....... $ (.02) $ .12 $ (.01) $ .07 --------- ---------- -------- -------- --------- ---------- -------- -------- DECEMBER 31, 1995 MARCH 31, 1996 AS ADJUSTED(5) ----------------- -------------- -------------- SUMMARY BALANCE SHEET DATA: Working capital................................. $ 380,558 $ 276,318 $4,830,367 Total assets.................................... 893,100 1,242,487 5,417,487 Long-term debt(6)............................... 300,000 269,248 269,248 Shareholders' equity(7)......................... 310,330 328,108 4,745,330
THE FOLLOWING INFORMATION RELATES TO THE OPERATIONS OF A CORPORATION ("TPCNA") WHICH WAS A SUBSIDIARY OF CATALOG PUBLISHING GROUP, INC. FROM SEPTEMBER 1993 THROUGH MAY 9, 1994: PERIOD JANUARY 1, 1994 THROUGH MAY 9, 1994(8) ------------------------------ Direct revenues................................ $175,056 Total direct operating expenses................ 104,984 ---------- Direct revenues over direct operating expenses. $ 70,072 ---------- ---------- - ------------ (1) For information concerning this note, see "Certain Transactions" and Notes 6 and 7 of Notes to "Financial Statements." (2) The unaudited pro forma Statements of Income Data have been adjusted for income taxes which would have been recorded had the Company not been an S corporation, based on the tax laws in effect during the periods presented. Pro forma deferred income taxes relate primarily to temporary differences between financial and income tax reporting for the cash basis to accrual basis adjustments and depreciation expense. The net effect of these and other temporary differences has not been reflected in the Financial Statements since the Company was an S corporation prior to January 1, 1996. (3) From inception through December 31, 1995, the Company elected to be taxed as an S corporation under the Internal Revenue Code. Accordingly, taxable income or loss passed directly to the shareholders, and the Financial Statements through 1995 did not provide for income taxes. The S corporation election was terminated effective January 1, 1996. In connection with this termination, the Company recorded deferred taxes of $48,110. 5 (4) Net income (loss) per share of Common Stock has been computed using the weighted average number of shares of Common Stock outstanding. The number of shares of Common Stock utilized in computing net income (loss) per share was 2,955,000 for the years ended December 31, 1994 and 1995. See Note 9 of Notes to "Financial Statements." (5) Adjusted to reflect the sale of the 1,000,000 shares of Common Stock and the application of the estimated net proceeds described in "Use of Proceeds." (6) Gives effect to the issuance in March 1996 of notes totalling approximately $268,000 payable to shareholders on June 30, 1997 representing undistributed 1995 Subchapter S income. Includes accrued interest at March 31, 1996. See "Subchapter S Distributions." (7) Gives effect to distributions to shareholders in March 1996 of approximately $179,000 representing the approximate amount of federal income taxes due on 1995 Subchapter S income. See "Subchapter S Distributions." (8) For information concerning TPCNA, see Note 7 to Notes to "Financial Statements." 6 RISK FACTORS The Common Stock being offered hereby is speculative and involves a high degree of risk, including, but not necessarily limited to, the risk factors described below. Prior to making an investment, prospective investors should carefully consider the following risk factors, as well as others described elsewhere in the Prospectus, relating to the business of the Company and this offering. NEED TO MANAGE GROWTH Since inception, the Company has experienced a period of rapid growth of its revenues which has caused, and will continue to cause, a substantial strain on its administrative, operational and financial resources. The Company plans to continue to aggressively expand its operations. The Company's success will depend, in part, on its ability to manage its growth and to enhance its operational and financial controls. In order help manage this growth, the Company has recently recruited a Chief Financial Officer who will be required to implement financial and other operational controls. The Company has limited management depth. Its management is increasingly focusing its attention on the expansion of the Company's business to include electronic publishing on the Internet. If the Company continues to grow in the future, for which no assurances can be given, it will need to be able to attract and retain highly experienced executives and employees capable of providing the necessary support. There can be no assurances that the Company will be able to successfully manage its future growth. See "Business", "Management" and "Financial Statements." DEPENDENCE ON MANAGEMENT The Company's success to date has depended in large part on the skills and efforts of Peter S. Balise, its President, and D. Scott Plakon, its Executive Vice President. The Company has relied upon Mr. Balise to establish relationships with officials of various bar associations. If Mr. Balise were to become unavailable, the business of the Company could be materially adversely affected. Messrs. Balise and Plakon's three-year employment agreements entered into in April 1996 each contain a covenant not to compete against the Company for a period of two years following termination of employment. The Company is in the process of obtaining a key-man policy insuring the life of Mr. Balise in the amount of $2,000,000 and has agreed with the Representative to keep the policy in force for a period of three years from the date of this Prospectus. See "Management." NEW LINES OF BUSINESS The Company has recently designed its first Web site on the Internet which was for the Atlanta Bar Association. In December 1995, the Company published its first bar association newsletter. While both new lines of business are similar to its print directory publishing business, these new lines of business are highly competitive. There can be no assurances that the Company will be successful in these new lines of business. See "Business--Internet Services." COMPETITION There are no significant barriers to entry in the business in which the Company is engaged. For this reason, the Company's business is subject to current and future competition. Many of its current competitors are (and potential competitors may be) substantially larger and have greater financial resources than the Company. There can be no assurances that the Company can compete profitably with such other companies on a long-term basis. In its traditional print bar directory publishing business, the market for state and local directories is highly fragmented and localized. In the electronic publishing segment of its business, the Company faces substantial competition from businesses which have long established reputations with lawyers. One of these competitors sells a multi-volume print national bar directory. Moreover, there are a large number of businesses which design World Wide Web sites. The principal competitive factors in providing Web sites for bar associations are reputation, price, 7 the marketing strength of the larger competitors and personal or business relationships. Because of these factors, and the relative ease of entry for potential competitors, the Company faces significant competition. See "Business--Competition." TURNKEY PUBLISHING The Company publishes its bar directories and newsletters on a "no cost" turnkey basis. This means that the Company assumes all costs of publication and must rely upon the sale of advertising to generate revenues. Turnkey publishing subjects the Company to a number of potential risks, including the inability to sell sufficient advertising to cover its direct and indirect costs. Based on its experience and its high operating margins, the Company believes that this risk is not significant. However, no assurances can be given that the Company will continue to operate profitably in the future. LIMITED CAPITALIZATION AND OPERATING HISTORY The Company commenced operations in September 1993 and has financed its growth principally with revenues from operations. In addition to its limited operating history, the Company has limited capitalization. Investors should be aware that companies with limited capitalization and operating history have a high degree of risk. See "Capitalization." POSSIBLE FLUCTUATIONS IN OPERATING RESULTS The Company has a limited operating history. Although revenues and operating income have increased steadily, the growth rates experienced by the Company to date may not be indicative of future growth rates. To the extent that a material number of directories or newsletters are delayed in publication during a given quarter, the results of operations for that quarter and the following quarter will be affected. For this reason, and in view of the Company's limited operating history, the Company believes that period-to-period comparisons of its past or future operating results may not be meaningful. Future results of operations may fluctuate significantly based upon numerous factors, including market acceptance of the Company's products and services, unanticipated publishing delays, the size and rate of growth of the Internet market, the Company's ability to enhance existing (and develop) new products and services, the Company's ability to penetrate new markets and increases in competition. There can be no assurances that the Company will be able to maintain profitability on a quarter-to-quarter basis or at all. See "Financial Statements." CONTROL BY EXECUTIVE OFFICERS, DIRECTORS AND PROPOSED DIRECTORS Upon completion of this offering, the Company's executive officers and directors will beneficially own approximately 46.8% of the Company's outstanding Common Stock. Because of this ownership, and certain anti-takeover provisions that will be contained in the Company's Amended and Restated Articles of Incorporation (the "Articles"), these persons will most likely be able to control the election of the Company's directors and thereby control the policies and operations of the Company. However, as no voting agreements exist among these executive officers and directors, each is able to vote as he may desire on any issue affecting the Company. See "Management", "Principal Shareholders" and "Description of Securities." NEED FOR ADDITIONAL FINANCING The Company is dependent upon the proceeds of this offering or other financing in order to implement its proposed expansion. The Company believes that the net proceeds of this offering will be sufficient to meet its needs for at least 12 months following this offering. In the event that such proceeds prove to be insufficient for such purposes or the Company does not continue to generate cash flow from operations sufficient to satisfy its capital requirements as anticipated, the Company may be required to seek additional financing. There can be no assurances that the Company will be able to obtain such 8 financing on a timely basis, on acceptable terms, or at all. In such event, the Company may be unable to complete its current plans for expansion. See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." IMMEDIATE SUBSTANTIAL DILUTION The proposed initial public offering price is substantially higher than the book value per share of the Company's Common Stock. Investors purchasing shares of Common Stock in this offering will incur immediate and substantial dilution of approximately $4.32 per share, or approximately 79% of the initial public offering price per share, in net tangible book value of the Company's Common Stock (giving effect to the receipt by the Company of the estimated net proceeds and assuming an initial public offering price of $5.50 per share). Additional dilution may result following the exercise of the Representative's Warrants or the exercise of options under the Company's 1996 Stock Plan. See "Dilution." CHANGES IN TECHNOLOGY If the Company's electronic publishing business utilizing the Internet becomes material to its operations, it will be subject to rapid changes in technology, including potential introduction of new types of products and technologies. Such changes may have a material adverse impact upon the Company's business. The Company's Internet services also will be dependent upon continued public acceptance of the Internet. There can be no assurances that the development of technologies and products by competitors, or a change in public acceptance of the Internet, will not materially adversely affect the Company's electronic publishing business. REPAYMENT OF BRIDGE NOTES; BROAD DISCRETION IN APPLICATION OF PROCEEDS After repaying the $300,000 of Bridge Notes held by 10 shareholders, including the Company's President, Chief Financial Officer and two proposed directors, the Company will have a substantial amount of unspecified proceeds remaining. While the Company has identified certain uses, including expansion of Internet services, the establishment of a program to secure long-term agreements to publish bar association print and electronic directories, acquisition of equipment, expansion of sales and marketing efforts, potential acquisitions and working capital, management of the Company will have broad discretion to determine how such proceeds will be applied. As a result, the success of the Company will be substantially dependent upon the discretion and judgment of the management of the Company with respect to the application and allocation of the net proceeds of this offering. See "Use of Proceeds." RISK OF ACQUISITIONS The Company's growth strategy depends, in part, on its ability to acquire and successfully operate additional publishers. There can be no assurances that suitable acquisitions can be identified, consummated or successfully operated. In addition, increased competition may increase the purchase price for acquisitions to levels beyond the Company's financial ability. See "Use of Proceeds" and "Business-- Future Strategy." ANTI-TAKEOVER CONSIDERATIONS Following this offering, the Company's Articles will classify the Board of Directors into three classes. Two members of the Board of Directors will serve a three-year term, one will serve a two-year term and one will serve a one-year term. Commencing with the 1997 Annual Meeting of Shareholders, one class will be elected each year to a three-year term. Because this provision delays a potential acquiror in acquiring control of the Board of Directors, it has the tendency to discourage takeovers. Additionally, the Articles require a super-majority vote to remove directors, which also may discourage 9 a hostile takeover, even if it is in the best interests of all other shareholders. While the Company has no authority to issue any preferred stock or other classes of its capital stock other than Common Stock, its executive officers and directors will beneficially own 46.8% of the outstanding Common Stock following this offering and will most likely be able to control the Company in the future. Through such control, they may have the ability to cause the Company to issue a class of preferred or other stock which could contain more than one vote per share and such other relative rights, powers, preferences, limitations and restrictions as are determined by the Board of Directors at the time of issuance. The issuance of such securities could adversely affect the holders of Common Stock. However, as no voting agreements exist among the Company's executive officers and directors, each is able to vote as he may desire on any issue affecting the Company. In addition, certain statutory provisions of Florida law could have the affect of delaying, deferring or preventing a change in control of the Company. See "Principal Shareholders" and "Description of Securities--Anti-Takeover Provisions of Florida Law." SHARES ELIGIBLE FOR FUTURE SALE AND REGISTRATION RIGHTS All of the 2,961,000 shares of Common Stock outstanding are "restricted securities" as that term is defined under the Securities Act and may only be sold pursuant to a registration statement or in compliance with Rule 144 under the Securities Act or other exemption from registration. Rule 144 provides, in essence, that a person holding restricted Common Stock for a period of two years may sell such securities during any three month period, subject to certain exceptions, in amounts equal to the greater of (i) one percent (1%) of the Company's outstanding Common Stock or (ii) the average weekly trading volume of the Common Stock during the four calendar weeks prior to the filing of the required Form 144. Rule 144 also permits, under certain circumstances, the sale of shares without any quantity limitation by a person who is not an affiliate of the Company and who has satisfied a three year holding period. Last year, the Securities and Exchange Commission (the "Commission") proposed to amend Rule 144 by reducing the two and three year holding periods to one and two years, respectively. The Company cannot predict whether this proposed amendment will be adopted. All of the Company's executive officers, directors, proposed directors and certain other shareholders have agreed not to publicly sell 2,932,500 shares of the Company's Common Stock (including 17,500 shares acquired in the Private Placement) for a period of 13 months from the date of this Prospectus without the Underwriter's prior written consent. After expiration of these lock-up agreements, all outstanding shares of Common Stock will be eligible for sale under Rule 144 except for 150,550 shares and the 30,000 shares acquired in the Private Placement. The Company has agreed to register 17,500 of these 30,000 shares to permit their public sale after expiration of the lock-up agreements. In addition, 12,500 shares of Common Stock issued in the Private Placement are eligible for sale pursuant to the Selling Shareholders' Prospectus. However, holders of these 12,500 shares have agreed not to sell such shares of Common Stock without the prior consent of the Underwriter for up to 90 days from the date of this Prospectus. In January 1997, 16,000 shares of Common Stock not subject to any lock-up agreement may be sold pursuant to Rule 144. The remaining 150,550 shares become eligible for sale under Rule 144 in March and April 1998. The availability for sale of substantial amounts of Common Stock subsequent to this offering could adversely affect the prevailing market price of the Common Stock and could impair the Company's ability to raise additional capital through the sale of its equity securities. See "Principal Shareholders", "Certain Transactions", "Concurrent Offering" and "Shares Eligible for Future Sale." REPRESENTATIVE'S WARRANTS The Company will sell to the Representative and/or its designees, for nominal consideration, the Representative's Warrants to purchase up to 95,000 shares of Common Stock. The Representative's Warrants are exercisable for a period of four years commencing one year after the date of this Prospectus at an exercise price per share equal to 120% of the initial public offering price or $6.60 per share. For the life of the Representative's Warrants, the holders are given, at nominal cost, the opportunity to profit from a rise in the market price of the Common Stock of the 10 Company without assuming the risk of ownership, which may result in the dilution in the interest of other shareholders. Commencing one year from the date of this Prospectus, holders of the Representative's Warrants have certain registration rights. Exercise of these registration rights could involve substantial expense to the Company at a time when it could not afford cash expenditures, may adversely affect the terms upon which the Company may obtain additional funding and may adversely affect the price of the Common Stock. Additionally, if the holders of the Representative's Warrants exercise their registration rights to sell shares of Common Stock, the Representative, prior to and during such distribution, may be unable to make a market in the Company's Common Stock and would be required to comply with other limitations on trading set forth in Rules 10b-6 and 10b-7 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"). Such rules restrict the solicitation of purchasers of a security when a person is engaged in the distribution of such security and also limit certain market making activities in such securities. See "Underwriting." DETERMINATION OF OFFERING PRICE; POSSIBLE VOLATILITY OF COMMON STOCK PRICE The initial public offering price of the Common Stock has been determined by negotiations between the Company and the Representative and does not necessarily reflect the Company's book value, results of operations, net worth or other established criteria of value. The stock market has from time to time experienced significant price and volume fluctuations that may be unrelated to the operating performance of any particular company. The market price of the securities of many newly-traded public companies have in the past been, and can be expected in the future to be especially volatile. Factors such as the Company's operating results, announcements by the Company of new agreements for its products or services and announcements by the Company or its competitors concerning technological innovations or new services may have a significant impact on the market price of the Company's Common Stock. See "Underwriting." ABSENCE OF PUBLIC MARKET Prior to this offering, there has been no public market for the Company's Common Stock. Although the Common Stock has been approved for listing on the NMS, there can be no assurances that an active market in the Common Stock will develop or, if such a market develops, that it will be sustained. Additionally, there can be no assurances that the Company will meet the criteria for continued listing on NMS. If the Company is unable to satisfy the NMS maintenance requirements, its Common Stock may be moved to the Nasdaq SmallCap Market and the liquidity and price of the Company's Common Stock could be impaired. NO DIVIDENDS ANTICIPATED As a Subchapter S corporation, the Company has paid dividends on its Common Stock since inception. However, effective January 1, 1996 the Company revoked its Subchapter S status. It does not contemplate paying any dividends on its Common Stock in the foreseeable future. It is currently anticipated that earnings, if any, will be used to finance the development and expansion of the Company's business. See "Subchapter S Distributions" and "Description of Securities--Dividend Policy." LIMITATION OF LIABILITY The Florida Business Corporation Act provides that a director is not personally liable for monetary damages to the Company or any other person for breach of fiduciary duty, except under very limited circumstances. Such a provision makes it more difficult to assert a claim and obtain damages from a director in the event of his non-intentional breach of fiduciary duty. See "Management--Limitation of Liability." 11 USE OF PROCEEDS The net proceeds to the Company from the sale of 1,000,000 shares of Common Stock offered hereby are estimated to be approximately $4,475,000 (assuming an offering price of between $5.50 per share) after deducting underwriting discounts and commissions and the estimated expenses of this offering. The Company presently intends to use the net proceeds as follows:
ANTICIPATED USE OF NET PROCEEDS AMOUNT PERCENTAGE - --------------------------------------------------------------------- ---------- ---------- Repayment of Bridge Notes(1)......................................... $ 300,000 7% Expansion of Internet Services(2).................................... 475,000 11% Securing Long-Term Agreements(3)..................................... 750,000 17% Acquisition of Equipment(4).......................................... 750,000 17% Acquisitions(5)...................................................... 1,000,000 22% Sales and Marketing(6)............................................... 325,000 7% Working Capital...................................................... 875,000 20% TOTAL.............................................................. 4,475,000 100%
- ------------ (1) The Company borrowed $300,000 in March 1996 through the Private Placement of units (the "Units") and one-half Units consisting of notes and an aggregate of 30,000 shares of Common Stock. Each Unit consisted of a $50,000 note (the "Bridge Note") and 5,000 shares of Common Stock. The Bridge Notes bear interest at a rate of 8% per annum and are due on the earlier of the closing of this offering or one year from the date of issuance. At the option of the Company, if the Company fails to complete this offering, it may extend the Bridge Notes for an additional one-year period by paying one-third of the principal plus accrued interest, and increasing the interest rate on the remaining balance to 12% per annum. In such event, one-half of the remaining balance plus accrued interest shall be due six months after the original due date and the remaining balance plus accrued interest shall be due an additional six months thereafter. The $300,000 is being used for the expenses of this offering and working capital. The Bridge Notes are held by 10 shareholders including the Company's President, Chief Financial Officer and two proposed directors. See "Certain Transactions" and "Concurrent Offering." (2) Includes acquisition of additional computer servers, other computer hardware and software, upgrading telephone lines necessary for maintaining Web sites and increased support staff. See "Business--Internet Services." (3) Represents payments to bar associations in order to obtain long-term agreements to publish their print and electronic directories. The Company intends to seek such agreements from larger bar associations in order to gain market share and deter potential competition. As of the date of this Prospectus, the Company has not entered into any agreements with respect to such payments. See "Business--Future Business Strategy." (4) Includes similar computer hardware and software referred to in Note (2) for the purpose of supporting expansion of the Company's bar association print directory business. (5) The Company intends to seek to increase market share through the acquisition of print directory competitors or the rights to certain publishing contracts held by such competitors. As of the date of this Prospectus, the Company has not entered into any agreements, understandings or commitments relating to any potential acquisition, has no plans or intentions with respect to acquisitions and is not conducting any negotiations with respect to any such transactions. There can be no assurances that suitable acquisitions can be identified, consummated or successfully operated or that the Company's goals will otherwise be achieved. (6) Includes the cost of hiring and training additional account executives and support staff. Also includes the cost of increased attendance at trade shows and design and acquisition of an exhibit booth. In the event that the Underwriters exercise the Over-Allotment Option, the Company will utilize any additional net proceeds for working capital. 12 The foregoing represents the Company's best estimate of its allocation of the net proceeds of this offering based upon the current state of its business, operations and plans, current business conditions and the Company's evaluation of its industry. Future events, including problems, delays, expenses and complications which may be encountered, changes in economic or competitive conditions and the results of the Company's sales and marketing activities may make shifts in the allocation of funds necessary or desirable. Management will have broad discretion to determine the use of proceeds. The expenses incurred in connection with its marketing strategy cannot be predicted with certainty, and a lack of success in the implementation of the Company's new marketing efforts may necessitate the redirection of the Company's efforts. The Company previously has not attempted to market its products and services in this manner. Its Internet services also represent a relatively new business venture. There can be no assurances that the Company's establishment of a program to secure long-term agreements to publish bar association print and electronic directories, or the Company's expansion of its business to include electronic publishing on the Internet will be successful. The Company believes that the net proceeds of this offering, together with the cash generated from operations, will be sufficient to support the Company's anticipated growth, expansion and marketing efforts for at least 12 months following the completion of this offering. The Company may be required to obtain additional equity or debt financing or otherwise fund its operations after such 12-month period. There can be no assurances that the Company will be able to obtain such financing on a timely basis, on acceptable terms, or at all. In such event, the Company may be unable to complete its current plans for expansion. If the Company requires such financing and is unable to obtain it, the Company's operations will be materially adversely effected. See "Risk Factors--Need for Additional Financing." Pending application of the net proceeds for the purposes described above, the Company intends to invest the net proceeds primarily in United States government securities, short-term certificates of deposit, money market funds or other short-term, interest-bearing, investment grade securities. DILUTION At March 31, 1996, the net tangible book value of the Company was $191,281 or approximately $.06 per share. Net tangible book value represents the Company's tangible assets in excess of its total liabilities. After giving effect to the receipt of net proceeds (estimated to be approximately $4,475,000) from the sale of the 1,000,000 shares of Common Stock being offered hereby, the pro forma net tangible book value of the Company at March 31, 1996 would have been approximately $4,666,280 or $1.18 per share of Common Stock, representing an immediate increase in the pro forma net tangible book value of $1.12 per share to existing shareholders and an immediate dilution of $4.32 per share (or 79%) to new investors. Dilution per share represents the difference between the public offering price per share (assuming an offering price of $5.50 per share) and the pro forma net tangible book value per share after the offering. The following table illustrates the per share dilution: Initial public offering price per share.................................. $ 5.50 ------- Net tangible book value per share before offering...................... $ .06 ------- Increase per share attributable to new investors....................... $ 1.12 ------- Pro forma net tangible book value per share after offering............... $ 1.18 ------- Dilution per share to new investors...................................... $ 4.32 ------- -------
The above table assumes no exercise of outstanding options. As of the date of this Prospectus, there are outstanding stock options to purchase an aggregate of 108,500 shares of Common Stock exercisable at $5.50 per share (the initial public offering price). See "Management--1996 Stock Plan." 13 The following table sets forth at March 31, 1996, with respect to the Company's existing shareholders and new investors in this offering, a comparison of the number of shares of Common Stock acquired from the Company, the percentage of ownership of such shares, the total consideration paid, the percentage of total consideration paid and the average price per share paid by the investors in this offering and the current shareholders of the Company:
TOTAL CASH SHARES PURCHASED CONSIDERATION PAID -------------------- ----------------------- AVERAGE NUMBER PERCENT AMOUNT(1)(2) PERCENT PRICE PER SHARE --------- ------- ------------ ------- --------------- Existing Shareholders.................. 2,961,000 74.8% $ 197,878 3% $0.07 New Investors.......................... 1,000,000 25.2% $5,500,000 97% $5.50 --------- ------- ------------ ------- Total.................................. 3,961,000 100.0% $5,697,878 100% $1.44 --------- ------- ------------ ------- --------- ------- ------------ -------
- ------------ (1) Includes $120,000 representing undistributed retained earnings at January 1, 1996. (2) Includes $77,778 representing the allocation of proceeds based on the relative fair market value of the 30,000 shares of Common Stock included in the Bridge Units. The above tables assume no exercise of the Over-Allotment Option. If such Option is exercised in full, the new investors will have paid $6,325,000 for 1,150,000 shares of Common Stock, representing approximately 100% of the total consideration for 28% of the total number of shares of Common Stock outstanding. 14 CAPITALIZATION The following table sets forth the capitalization of the Company at March 31, 1996 and as adjusted to give effect to the sale of the 1,000,000 shares of Common Stock offered hereby and the application of the estimated net proceeds therefrom (assuming an offering price of $5.50 per share). See "Use of Proceeds." MARCH 31, 1996 -------------------------- ACTUAL AS ADJUSTED(2) -------- -------------- Long-term debt(1).................................. $269,248 $269,428 -------- -------------- Shareholders' equity: Common Stock, no par value, 15,000,000 shares authorized; 2,961,000 shares issued and outstanding; 3,961,000 shares as adjusted..................... 197,878 4,672,878 -------- -------------- Retained Earnings.................................. 147,750 147,750 -------- -------------- Total Shareholders' Equity(3)...................... 328,108 4,803,108 -------- -------------- Total Capitalization............................... $597,356 $5,072,536 -------- -------------- -------- -------------- - ------------ (1) In March 1996, the Company distributed approximately $179,000 to its shareholders representing the approximate federal income taxes due on 1995 Subchapter S income and issued to its shareholders notes totalling approximately $268,000 due June 30, 1997 for the balance of the 1995 Subchapter S income. As of March 31, 1996, interest of approximately $900 had accrued on these notes. See "Certain Transactions." (2) Does not include (i) 95,000 shares of Common Stock issuable upon exercise of the Representative's Warrants (ii) 500,000 shares of Common Stock reserved for issuance under the Company's Plan of which 108,500 options exercisable at $5.50 per share (the initial public offering price) have been granted. See "Management--1996 Stock Plan" and "Underwriting." (3) Net of an unrealized loss of $17,520 from portfolio securities. The Company's cost of these portfolio securities is $34,020; at March 31, 1996 these securities had a market value of $16,500. 15 SELECTED FINANCIAL DATA The following selected financial data are derived from the financial statements of the Company. The data should be read in conjunction with the financial statements, related notes, and other financial information (incorporated by reference) herein.
YEAR ENDED QUARTER ENDED DECEMBER 31, MARCH 31, 1996 ----------------------- --------------------- STATEMENTS OF INCOME DATA: 1994 1995 1995 1996 - ---------------------------------------------- --------- ---------- -------- --------- Revenues: Net sales................................... $ 465,936 $1,949,266 $ 89,234 $ 978,677 Cost and expenses: Salaries and commissions.................... 190,507 817,764 82,078 312,615 Materials and printing...................... 58,652 247,978 10,891 127,084 General and administrative.................. 168,473 280,252 44,563 195,184 --------- ---------- -------- --------- Income (loss) from operations................. 42,349 565,549 (52,847) 326,858 Loss on uncollectible note.................... (100,553) -- -- -- Provision for income taxes.................... -- -- -- 166,110 Net income (loss)............................. $ (55,309) $ 580,246 $(51,767) $ 147,750 --------- ---------- -------- --------- --------- ---------- -------- --------- Pro forma:(1) Income (loss) as reported before provision for income taxes.................................. $ (55,309) $ 580,246 $(51,767) $ 313,860 Provision (benefit) for income taxes(2)....... 11,850 218,700 (19,480) 118,000 --------- ---------- -------- --------- Pro forma net income (loss)................... $ (67,159) $ 361,546 $(32,287) $ 195,860 --------- ---------- -------- --------- --------- ---------- -------- --------- Pro forma net income (loss) per share(3)...... $ (.02) $ .12 $ (.01) $ .07 --------- ---------- -------- --------- --------- ---------- -------- --------- SUMMARY BALANCE SHEET DATA: DECEMBER 31, 1995 MARCH 31, 1996 ----------------- -------------- Working capital............................. $ 380,558 $ 276,318 Total assets................................ 893,100 1,242,487 Long-term debt(4)........................... -- 269,248 Shareholders' equity(5)..................... 549,758 328,108 The following information relates to the operations of TPCNA(6): PERIOD JANUARY 1, 1994 THROUGH MAY 9, 1994 ------------------------- Direct revenues........................................ $ 175,056 Direct operating expenses: Commissions.......................................... 65,667 Salaries............................................. 11,814 Telephone............................................ 9,628 Printing and binding................................. 17,875 ---------- Total direct operating expenses........................ 104,984 ---------- Direct revenues over direct operating expenses......... $ 70,072 ---------- ----------
(Footnotes on following page) 16 (Footnotes for preceding page) - ------------ (1) The unaudited pro forma Statements of Income Data have been adjusted for income taxes which would have been recorded had the Company not been an S corporation, based on the tax laws in effect during the periods presented. Pro forma deferred income taxes relate primarily to temporary differences between financial and income tax reporting for the cash basis to accrual basis adjustments and depreciation expense. The net effect of these and other temporary differences has not been reflected in the Financial Statements since the Company was an S corporation prior to January 1, 1996. (2) From inception through December 31, 1995, the Company elected to be taxed as an S corporation under the Internal Revenue Code. Accordingly, taxable income or loss passed directly to the shareholders, and the Financial Statements through 1995 did not provide for income taxes. The S corporation election was terminated effective January 1, 1996. In connection with this termination, the Company recorded deferred taxes of $48,110. (3) Net income (loss) per share of Common Stock has been computed using the weighted average number of shares of Common Stock outstanding. The number of shares of Common Stock utilized in computing net income (loss) per share was 2,955,000 for the years ended December 31, 1994 and 1995. See Note 9 of Notes to "Financial Statements." (4) Gives effect to the issuance in March 1996 of notes totalling approximately $268,000 payable to shareholders on June 30, 1997 representing undistributed 1995 Subchapter S income. Includes accrued interest at March 31, 1996. See "Subchapter S Distributions." (5) Gives effect to distributions to shareholders in March 1996 of approximately $179,000 representing the approximate amount of federal income taxes due on 1995 Subchapter S income. See "Subchapter S Distributions." (6) For information concerning TPCNA, see Note 7 to Notes to "Financial Statements.' 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following discussion and analysis should be read in conjunction with the Financial Statements of the Company and notes thereto, and is qualified in its entirety by the foregoing and by other more detailed financial information included elsewhere in this Prospectus. Reference is also made to the Schedule of Direct Revenues and Direct Operating Expenses and the Notes thereto of TPCNA, a subsidiary of Catalog Publishing Group, Inc. included elsewhere in this Prospectus. The Company acquired the assets of TPCNA in May 1994. See Note 7 to Notes to "Financial Statements." RESULTS OF OPERATIONS The following table sets forth operating data of the Company as a percentage of net sales for the periods indicated:
YEAR ENDED QUARTER ENDED DECEMBER 31, MARCH 31, -------------- -------------- 1994 1995 1995 1996 ----- ----- ----- ----- Net sales............................................... 100.0% 100.0% 100.0% 100.0% Salaries and commissions................................ 40.9 42.0 92.0 31.9 Printing costs.......................................... 12.6 12.7 12.2 13.0 Depreciation............................................ 1.3 1.9 5.1 1.7 Other operating costs................................... 36.2 14.4 49.9 19.9 Operating income (loss)................................. 9.1 29.0 (59.2) 33.4 Net income (loss) before taxes(1)....................... (11.9) 29.8 (58.0) 32.1
- ------------ (1) The net loss for fiscal 1994 gives effect to a $100,553 loss the Company incurred on an uncollectible note held by its President, Mr. Peter S. Balise. Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 Net sales for the year ended December 31, 1995 increased 318.3% or approximately $1,483,000 from the year ended December 31, 1994. This does not give effect to net sales of $175,056 of TPCNA for the period January 1, 1994 through May 9, 1994. The increase in 1995 sales represents a continuing demand for the Company's print bar directories. In fiscal 1995, the Company generated revenues of approximately $565,000 (29% of net sales) from directories for two bar associations, each of which accounted for more than 10% of the Company's 1995 net sales. The Company did not publish bar directories for these two bar associations in 1994. In 1995, the Company published 33 directories as compared to 16 directories in 1994. See "Business--Significant Clients." Salaries and commissions increased by 329.3% to $817,764 in fiscal 1995. This does not give effect to approximately $77,500 of direct commissions and salaries of TPCNA in 1994. This substantial increase correlates to the increase in revenues. The Company expects another substantial increase in salaries in fiscal 1996 since it has increased and intends to increase its staff. In addition to hiring a Chief Financial Officer and a director of Internet services this year, the Company will recruit additional account executives to sell advertising for its directories, Internet services and newsletters, and additional support persons. While the level of these expenses in future years cannot be predicted and is dependent in large part upon the Company's success in implementing its business strategy, management anticipates the addition of personnel will increase the level of the Company's expenses. The Company expects these additional expenses will be offset by increased revenues generated by its enhanced marketing efforts and development of its Internet operations. 18 Materials and printing costs are the principal direct expenses incurred by the Company in connection with the printing of its bar directories. Other costs such as transportation and telephone costs are contained in the item entitled other operating costs. Both of these categories increased in 1995 as the result of the increase in the Company's business. In fiscal 1995, materials and printing costs increased 322.8% to approximately $248,000 from approximately $58,700 in 1994. TPCNA's printing and binding costs in 1994 were approximately $17,900. Other operating costs consist of all selling, general and administrative expenses excluding salaries and commissions. For fiscal 1995, other operating costs increased 66.3% or by $111,779. TPCNA's other expenses are not available except for approximately $9,600 in telephone costs incurred by it in 1994. The smaller increase in this category of costs reflects a smaller incremental increase in fixed costs necessary to support the growth in revenues. Income from operations for 1995 increased to $565,549 from $42,349 in 1994. The Company's net income of $580,246 for fiscal 1995 does not include any provision for income taxes because the Company elected to be taxed under Subchapter S of the Internal Revenue Code through December 31, 1995. For the year ended December 31, 1994, the Company incurred a net loss of $55,309 for the reasons discussed below. Pro forma net income for 1995 was $361,546 compared to a pro forma net loss of $67,159 for 1994. In 1994, the Company's net loss gives effect to a $100,553 loss incurred on an uncollectible note held by its President, Mr. Peter S. Balise. See Note 7 to Notes to "Financial Statements." QUARTER ENDED MARCH 31, 1996 COMPARED TO QUARTER ENDED MARCH 31, 1995 Net sales for the quarter ended March 31, 1996 increased approximately $889,000 or 997% from the same period a year earlier. The Company published 14 print directories in the most recent quarter, as compared to three in the quarter ended March 31, 1995. Publication of a bar association newsletter contributed approximately $24,000 in first quarter 1996 revenues; there were no such revenues in the same period of 1995. No revenues have been recognized yet from the Company's Internet publishing; there will be revenues from Internet publishing in the second quarter of 1996 although such revenues are not expected to be material. The Company's costs as a percentage of sales, except for printing and related production costs, declined in first quarter of 1996 due to economies of scale. Printing and production costs increased slightly. These costs represent the amounts paid to third parties. Income before taxes for the March 31, 1996 quarter was $313,860 in contrast to a loss of $51,767 for the comparable quarter in 1995 reflecting the substantial increase in net sales. Net income after taxes for the most recent quarter was $147,750 which included a $48,110 charge for deferred taxes incurred in connection with the Company's conversion from an S Corporation effective January 1, 1996. On a pro forma basis, without giving effect to the charge for deferred taxes, net income after taxes for the March 31, 1996 quarter was $195,860 or $.07 per share in contrast to a $32,287 loss for the first quarter of 1995 of $.01 per share. The Company shall incur a charge of $77,778 from the issuance of 30,000 shares of Common Stock in the March 1996 Private Placement. For the quarter ended March 31, 1996, the Company incurred an expense of $20,000 as a result of the issuance of these shares. Furthermore, the Company will incur an additional $57,778 charge as the result of the issuance of these 30,000 shares which it expects will be expensed in the second quarter of 1996 assuming this offering closes by June 30, 1996. This $57,778 expense may, depending upon operating results, have a material impact on the Company's result of operations. 19 LIQUIDITY AND CAPITAL RESOURCES The Company's cash position at March 31, 1996 decreased slightly from December 31, 1995. To pay for the expenses of this offering and provide certain interim working capital, the Company borrowed $300,000 in March 1996 through the sale of Units in the Private Placement. In addition to paying $136,827 in offering expenses during the March 31, 1996 quarter, the Company also distributed approximately $179,000 to its shareholders representing a portion of 1995 Subchapter S income. See "Certain Transactions" and "Subchapter S Distributions". Net cash provided by operating activities was $64,137 for the quarter ended March 31, 1996 and $487,182 and $105,664 for the years ended December 31, 1995 and 1994, respectively. The Company has achieved its growth with working capital generated from operations rather than equity or debt financing except for the March 1996 Private Placement. The Company currently has no credit facilities in place at any financial institutions. Net cash used in investing activities was ($50,947) in the quarter ended March 31, 1996 and ($155,069) and ($64,184) in fiscal 1995 and 1994, respectively. All $50,947 invested in fiscal 1996, and approximately $128,800 in 1995 and approximately $66,700 in 1994, was used to purchase property and computer equipment. Net cash used in financing activities was ($15,698) in the quarter ended March 31, 1996 and ($61,614) and ($24,649) in fiscal 1995 and 1994, respectively. In fiscal 1996 and 1995, the Company distributed $178,871 and $48,004, respectively, to its shareholders as Subchapter S distributions for income reported in the immediate prior year. Because the Company incurred a loss for tax purposes in 1993, there were no Subchapter S distributions paid in 1994. Capital expenditures for the 12 months following this offering are estimated to be $974,000, primarily for computer and office equipment. The Company has no commitments to acquire a material amount of other capital assets. See "Use of Proceeds." At March 31, 1996, the Company's current assets exceeded its current liabilities by approximately $276,318. The Company is using its cash balances to support its growth. At its current growth rate, the Company requires substantial working capital to support its operations including paying its administrative expenses, obtaining long-term agreements from bar associations to publish print and electronic directories and publishing directories. See "Subchapter S Distributions." The Company is dependent upon the proceeds of this offering or other financing in order to meet its working capital needs and support its anticipated future growth. See "Use of Proceeds." PRO FORMA INFORMATION Pro forma net income (loss) reflects provisions for federal and state income taxes as if the Company had not elected to be treated as a Subchapter S corporation and has been computed as if the Company were subject to federal and state income taxes for all periods presented, calculated in accordance with SFAS No. 109 based on tax laws in effect during the respective periods. See Note 4 to "Financial Statements." 20 BUSINESS GENERAL The Company is an integrated full service provider of specialty publishing for bar associations, focusing on print directories and Internet services. The Company's principal product is the publication of city and county bar association print directories throughout the United States. In March 1996, the Company published its first state bar directory which was for the New Hampshire Bar Association. Bar association directories contain a complete listing of member attorneys and bar executives along with their addresses and telephone numbers. They often also contain court information and specialized local information which attorneys may need in order to carry on their business. In 1996, the Company expanded its business to include electronic publishing on the Internet. In January 1996, the Company established its first Web site on the Internet which is for the Atlanta Bar Association. More recently, the Company has reached understandings to establish a separate Internet presence for the Boston Bar Association, the Bar Association of the District of Columbia, the Cleveland Bar Association, the Orange County Bar Association, Inc. (Orlando, Florida), the Bar Association of Erie County (Buffalo, New York) and the Onondaga County Bar Association (Syracuse, New York). The Company publishes its print and electronic directories on a turnkey basis. As a turnkey publisher, the Company assumes all costs of publication, including design, printing and binding for its print directories as well as providing a Web site for its electronic directories. The Company relies upon the sale of advertising to generate its principal revenues. Both the print bar directories and Web sites are provided at no cost to bar associations. The Company is a Florida corporation which was organized in September 1993. At the time of its organization, Mr. Peter Balise, the founder and President of the Company, sold TPCNA to Catalog Publishing Group, Inc. ("Catalog"). The Company was essentially inactive until 1994 when Mr. Balise entered into an agreement with Catalog and the Company acquired the assets of TPCNA from Catalog. Except for the right to publish three bar directories and accounts receivable, the assets acquired by the Company from Catalog were not material. TPCNA was engaged in the business of publishing print bar directories. TPCNA published approximately six bar directories in 1993 and four in 1994. See "Certain Transactions" and "Financial Statements." Since inception, the Company has increased the number of print directories it has published from one directory in 1993, 16 directories in 1994 to 33 in 1995. In the first quarter of 1996, the Company published 14 directories and generated net sales of approximately $979,000, compared to three directories and net sales of approximately $89,000 for the first quarter of 1995. The Company's senior management has approximately 20 years of combined experience in publishing print specialty directories. This experience, the high quality of the print directories published by the Company and the Company's commitment to client service have contributed to the Company's pattern of growth. In December 1995, the Company became the publisher of the directory for the National Association of Bar Executives ("NABE") which is affiliated with the American Bar Association. NABE consists of executives from many leading bar associations at the state, county and local levels. NABE members include executives from all 50 state bar associations and many city bar associations such as Atlanta, Boston, Chicago, Dallas, Denver, Detroit, the District of Columbia, Houston, Los Angeles, New Orleans, New York, Philadelphia, San Francisco and St. Louis. As the publisher of the NABE directory, the Company believes that it has an important competitive advantage in the marketing of bar directories to NABE members. 21 PRINT DIRECTORIES Industry Overview The market for specialty publishing is rapidly growing because of the ever increasing need of businesses for more information. According to an industry source, 221 companies produced 300 databases worldwide in 1979; in 1993, a total of 2,221 companies produced 5,210 databases. As a result of this need for information, many publishers have oriented their business toward specialty publishing. The specialty publishing market is diverse, consisting of trade journals, newsletters, directories and magazines aimed at specific target markets such as computer users, sports fans, women or men, gun collectors, etc. Print directories, including association directories and yellow page directories, are just one part of the specialty publishing market. Advertisers increasingly are seeking ways to channel their advertising dollars toward target markets. Specialty publications, including the Company's bar association directories, offer advertisers the opportunity to advertise their products and services to these select markets. According to an industry source, there are almost 15,000 directories in print. This number does not include certain specialty directories such as the bar directories published by the Company. Directories are portable and easy to use and permit the user immediate access to certain information. There are two recognized trade associations in the directory publishing industry. They are the Association of Directory Publishers ("ADP") and the Directory Publishers Alliance. The Company is a member of ADP, which was founded in 1898 and currently has approximately 242 members. Most of the ADP's members focus on the publication of yellow page directories or specialty publications other than for bar associations. Recently, there has been a growing number of businesses involved in electronic publishing on the Internet joining ADP. Legal Specialty Market Bar directories have long been an important segment of the legal publishing industry. Legal directories are often used by attorneys and their staffs. Nationwide legal directories, such as the Martindale-Hubbell Law Directory ("Martindale-Hubbell"), can assist in searching for an attorney in another location with specific credentials and expertise. The majority of attorneys work for smaller law firms or government agencies which generally lack the substantial support staffs typically found in large law firms and corporations. These attorneys may rely on the information contained in their bar association directories. In the course of their profession, lawyers are required to frequently communicate with other lawyers. Therefore, bar directories meet a need of attorneys. From a lawyer's perspective, a bar directory contains a convenient listing of names, addresses and telephone numbers and often, facsimile numbers of co-counsel, opposing counsel, local courts and judges. Since a bar association directory is often used, the advertising contained in those directories is intended to reach its targeted audience on a regular basis. THE COMPANY'S BAR DIRECTORIES The Company provides bar directories at no cost to bar associations which in turn generally distribute the directories free of charge to their members as a benefit. The Company derives its principal revenues from the sale of advertising which is included in a section entitled Attorney Support Services, located after the listing of the association members. Advertisers are usually local merchants who market goods and services to lawyers in the communities served by the bar association. Typical merchants include title companies, court reporters, paralegal services, accountants, office supply companies, record storage companies, secretarial services, appraisers, investigators, expert witnesses, printing and copy services, travel agencies and cellular phone and pager companies. The Company also sells to attorneys the right to have their own specialty listings in the directories. These listings are contained in bar 22 directories published by the Company and provide a convenient source of referrals for attorneys who need assistance in a given area of the law for their clients. The Company targets bar associations with enough members within a localized area so that the potential advertising revenue is expected to exceed direct and indirect publishing costs. In order to do so, the Company researches the demographics of each bar association and the local community. The Company's target market consists of all bar associations with approximately 300 or more members although it has published directories for smaller bar associations. In targeting bar associations, the Company uses area demographics including the local yellow pages and other local publications to determine if the number of potential advertisers which meet its criteria exist in the community. The Company is concentrating its efforts on seeking to publish directories and provide Internet services for larger bar associations. The Company believes its credibility as a responsible publisher has been enhanced by its selection as the publisher of the NABE directory. Generally, NABE members include executive directors and key staff members of all 50 state and many local bar associations. These local bar associations include Atlanta, Boston, Chicago, Dallas, Denver, Detroit, the District of Columbia, Houston, Los Angeles, New Orleans, New York, Philadelphia, San Francisco and St. Louis. Once it targets a bar association for publication of its directory, the Company uses referrals from other clients to assist in obtaining an agreement to publish a directory. As the Company has expanded its operations, management has developed business relationships with bar association executives throughout the country. In addition, the Company uses its published bar directories and letters from satisfied bar associations as marketing tools to show prospective new clients. Because the Company believes bar association clients have been satisfied with its services, the Company offers a list of all past clients to bar executives upon request. Publication of Directories The Company publishes bar directories on a turnkey basis at no cost to the bar associations. The Company's no-cost turnkey program means that it will publish a directory and assume all costs for an association including design, advertising, printing and binding. In this fashion, the financial risk is transferred from the association to the Company. Based upon its experience and its high net operating margins, the Company believes that this risk is not significant. The publication of bar directories by the Company involves a number of stages. First the Company must obtain a contract to publish a directory from a bar association as described above. Once an agreement to publish is reached, the Company's in-house sales staff solicits advertisements by telephone from local businesses which provide goods and services to attorneys in the bar association's community. At the same time, through direct mail and newsletter advertising the Company solicits the sale of specialty listings from bar association members which generate additional revenues. A draft of all advertisements for the directory is submitted to the bar association which can reject any advertisements which do not meet its standards. To date, the Company has not experienced a rejection of a proposed advertisement. As part of the publication process, the association provides the Company with a complete database of membership information and other general information, such as court listings, which the association wants to include in the directory. Many of the directories published by the Company are pictorial. In these instances, the Company assists the association in arranging for photographs of its members using unaffiliated photographers. Most graphics for the directory are prepared by the Company's staff of graphic artists. Once all of the graphics are completed including advertising, the Company produces a draft of the directory, obtains approval from the bar association, and then arranges for printing and binding of the directory by an independent commercial printer. After printing and binding, the directories are shipped by the Company to the bar association which distributes them to its members. 23 Clients Through March 31, 1996, the Company has published 63 directories for bar associations. Some of its clients include: . Bar Association of the District of Columbia . Atlanta Bar Association (Atlanta, Georgia) . Multnomah Bar Association (Portland, Oregon) . Cuyahoga County Bar Association (Cleveland, Ohio) . Westchester County Bar Association (Westchester County, New York) . Baltimore County Bar Association (Baltimore, Maryland) . Palm Beach County Bar Association (Palm Beach County, Florida) . Amarillo Bar Association (Amarillo, Texas) . Bar Association of the City of Richmond (Richmond, Virginia) . New Hampshire Bar Association The publication of the New Hampshire Bar Association directory marks the Company's entry into directory publication at the state level. Most state bar association directories are published annually. As the Company has grown, it believes that its emerging national presence has given it the credibility to permit it to market its products and services to other state bar associations. There can be no assurances that the Company will be successful in this regard. Alternative Publishing Method In addition to turnkey publishing, bar associations can publish directories themselves. By self-publishing, the bar association staff compiles the information to be included, negotiates with printers and photographers and distributes the directories. Under this method, the association pays all costs. The association can attempt to recoup these costs from either the sale of advertisements or the sale of directories to its members. INTERNET SERVICES The Internet and its Benefits The Internet is a global collection of thousands of computer networks cooperating to enable commercial organizations, educational institutions, government agencies and individuals to communicate electronically, access and share information and conduct business. The Internet has been called the first global forum and the first global library. Unlike other public telecommunications networks, it is not managed by a single corporation, government agency, or other entity. There are numerous reasons why the Internet is having a major impact on businesses worldwide. First, any business using the Internet can interact with any other user of the Internet. Second, the Internet is available in most places: it is accessible in large cities and small towns throughout the United States and more than 70 countries throughout the world. The number of host computers or servers connected to the Internet increased from several hundred in the early 1980s to more than three million by the summer of 1994. Much of the growth was due to the federal government's support of Internet connections among educational institutions. A conservative estimate is that there are more than 15 million users of the Internet in the United States. Third, the Internet can accommodate diverse forms of business communications from simple text to graphic images and audio clips. Fourth, the concept of the Internet originated in the early 1970s with the United States Department of Defense, which designed it 24 for uninterrupted network operations in the event of a nuclear attack. Consequently, Internet technology is reliable. Finally, when compared with alternative networking technologies, access to the Internet is relatively easy and inexpensive. For the average user, one of the Internet's most important resources is the World Wide Web (the "Web"). The Web is a browsing and searching system comprised of computer servers, often referred to as "Web sites", each linked by a special communications protocol called hypertext. Hypertext works in the following manner. On a page of a Web site, there might be a reference to further information which is highlighted; that reference is a "link." If a user clicks onto that link with a mouse, the program takes the user to more detailed information. The links may be contained within a document or at the end and may connect the document on a computer system in one area of the country to a system in another area of the country. This open protocol allows Internet users to view and access text, graphics, digital video and audio available on a home page or to connect instantaneously to related and linked information on the same server or other home pages. The first page of a Web site, which has links to other documents, is referred to as its home page. In this Prospectus, the terms "Web site" and "home page" are used interchangeably. Since the Internet is an open system, anyone can create a Web site on the Internet in order to provide users with product or service information. Each Web site has an address which starts with "http" (hypertext transport protocol). Browsers, which are programs used to read a hypertext document and assist in "navigating" the Web, have helped contribute to the rapid growth of the Internet. A hypertext "document" is something that contains data and links to other documents. The Company believes that the Web will continue to grow rapidly as more businesses and consumers become aware of the advantages of communications on the Internet. Many persons who own personal computers ("PCs") subscribe to commercial on-line services (and can thereby access the Internet), or have direct access to the Internet through one of many access providers. Demographics show that nationally 50% of the PC owners have an income of more than $50,000 per year and 25% make over $75,000 per year. Approximately 30 million households currently have PCs compared to an estimated 13 to 14 million in the late 1980s. It is anticipated that family ownership of PCs could reach 43 million by 1997. Growth of the number of home PCs equipped with communication devices called modems has expanded Internet access from the office to also include the home. These technical and cultural trends and the development of Web technology and affordable user friendly software has made the Internet easier to navigate and more accessible to a larger number of users and for a broader range of applications. The use of the Internet by consumers has generated significant media interest. The Internet has the potential to expand marketing applications which previously were unavailable or cost prohibitive for many businesses and organizations. Through the use of the Internet, small and medium sized businesses and organizations can establish and maintain a nationwide or worldwide presence and market their products and services electronically. Just as use of the Internet is growing rapidly among general users, it is also growing rapidly within the field of law. In a recent newspaper article used by West Publishing Co. ("West") to promote its West Legal Directory, it was estimated that in November 1994, there were only five United States law firms with home pages on the Internet. The article estimates that by August 1995, there were between 500-1,000 law firm home pages. Attorneys can use the Internet to access law school libraries, recent legal opinions, newsletters, and advice columns published by other lawyers. As use of the Internet increases, the Company believes that use of the Internet by attorneys as a source to generate business will also increase. The Company's Internet Services In addition to acting as a traditional publisher of print directories, the Company provides electronic publishing services on the Internet for bar associations and their members. Just as it does with its print 25 directories, the Company offers its basic Internet services at no charge to bar associations. The Company custom designs and maintains a free Web site and provides an electronic directory for bar associations. For a basic electronic directory listing, no monthly subscription charges are billed to the association's members. However, the Company charges attorneys for specialty listings and home pages. The Company recognizes the growing awareness of the Internet and increasing usage by attorneys of on-line services. Consequently, it is devoting substantial resources to marketing and support of its Internet services. The Company introduced its Internet services program with the January 1996 publication of the home page for the Atlanta Bar Association. The Company's initial marketing efforts have generated substantial interest from bar associations and as of the date of this Prospectus, the Company has also reached understandings to provide Internet services for the Boston Bar Association, the Bar Association of the District of Columbia, the Orange County Bar Association, Inc. (Orlando, Florida), the Cleveland Bar Association, the Bar Association of Erie County (Buffalo, New York) and the Onondaga County Bar Association (Syracuse, New York)(1). As part of the marketing of its Internet services, the Company is making a special effort to cross-sell bar associations for which the Company has previously published bar directories. Similarly, when the Company obtains initial business from a bar association to provide Internet services, it will later seek to publish print bar directories for these Internet services' clients. Depending upon an association's needs, the Company can customize a Web site to include multiple features. Among these features are interactive forms including on-line membership applications. Each Web site will contain access to the same basic directory information found in print bar directories including membership listings, optional photographs and other information selected by a bar association. A Web site can contain a schedule of bar activities which can be updated "real-time." Other potential information to be found in a Web site can be information concerning continuing legal education programs and information relating to bar association committees. If the bar association publishes a newsletter, selected articles from the newsletter can be accessed from a Web site. Because consumers can access a Web site, a bar association can provide information of interest to the general public in order to enhance the community's perception of bar members. A Web site can contain a gateway to the Internet section in order to provide immediate access to other portions of the Internet for bar members. Bar association leaders can provide audio and written welcome messages for their members on a Web site. Finally, a Web site can contain interactive forums, either public or private, for members and other interested parties. The Company distributes free disks to any bar association which enters into an Internet service contract with the Company. The disks are provided by NetCom On-Line Communication Services, Inc. ("Netcom"), a leading Internet access provider. For larger associations, the disks can be programmed to automatically access the home page of the bar association's Web site. Under its agreement with the Company, NetCom supplies free disks and will share with the Company a portion of its revenues from bar member access fees subject to certain volume limitations. Depending upon the number of new accounts generated by the Company, NetCom shall pay the Company between 3%-7% of the monthly access fees paid to it. From the revenues received from Netcom, the Company may share a portion with bar associations. As with its print bar directories, the Company sells advertising and specialty listings to bar members. The Company also will seek to sell to attorneys and law firms home pages and additional pages containing detailed biographical and other information. In its Internet business, the Company will compete directly with three significant competitors which have an established presence in the legal market. These companies focus directly on the legal profession and have greater financial, marketing and other resources than the Company. Numerous other nationwide competitors which currently - ------------ (1) In February 1996, the Company entered into a long-term agreement with the Bar Association of the District of Columbia to provide Internet services and print bar directories. The Company published a print bar directory for the Onondaga County Bar Association in 1995. 26 provide various Internet services to businesses and individuals may also target the legal profession in the future. See "Risk Factors--Competition" and "Business--Competition." In order for the Company to establish Internet services for any particular bar association, the following sequence of events occurs. The Company works with a bar association to design a customized home page which meets the association's needs. From the home page, the user can link onto the other parts of the association's Web site. The Company adds other features requested by the association which may include the bar president's letter, the most recent newsletter or articles concerning current legal issues. Membership listings must be supplied by the bar association. Specialty listings and advertising are sold by the Company's sales staff. The bar association may review a proof of the Web site by viewing: (i) a pass-coded version of the home page placed on the Internet for live inspection; or (ii) through a disk which can be accessed through a personal computer; or (iii) printed hard copy. Upon approval by the bar association, the Internet services commence. NEWSLETTER PROGRAM Many bar associations publish a monthly newsletter which may be a simple multi-page letter-sized publication or may be in newspaper form. Newsletters offer bar associations the ability to maintain channels of communication with their members, providing them with updated information concerning matters of local interest, court calendars, information about continuing legal education programs and information about various social and fund raising events. Most self-published bar association newsletters contain a small amount of advertising similar to most bar directories. In December 1995, the Company began publishing the Atlanta Lawyer, the monthly newsletter for the Atlanta Bar Association. The Company provides this newsletter to all Atlanta Bar members at no cost. The Company derives its revenues from the sale of advertising contained in the newsletter. The content of the newsletter is provided to the Company by the Atlanta Bar Association and the advertising is solicited by the Company. Newsletter publishing also provides additional credibility. Bar members and advertisers are exposed to the Company and its products and services through the Company's own advertisement in the newsletters. The newsletters are generally published monthly or quarterly. Additionally, as the Company obtains agreements to provide Internet services for bar associations, publishing newsletters for the associations will afford the opportunity for the Company to regularly promote Internet specialty listings and home page services to attorneys. There can be no assurances that the Company will be successful in this regard. SALES AND ADVERTISING Revenues generated from the sale of advertising enable the Company to provide its print and electronic publications free of charge to bar associations. The Company maintains a staff of in-house account executives who specialize in selling advertisements by telephone to businesses which supply support services and products to the legal profession as well as to the general public. Examples of typical advertisers are found on page 22 of this Prospectus. The Company believes that through its in-house sales team of 27 full-time account executives, it is better able to maintain quality control and establish a reputation for professionalism. The Company's account executives are divided into separate divisions for print and electronic directories. The Company's management supervises the sales staff in order to ensure that it is acting in an ethical and professional manner and clearly communicates that the Company is independent of the bar associations. New account executives, whether experienced in sales or not, go through a structured 60-day training program. The Company's account executives are taught not merely how to sell advertising but also about the Company and its goals. In accordance with the Company's structured goal-oriented philosophy, each account executive works with the sales manager and each month prepares a goal sheet detailing realistic monthly and daily sales goals. 27 All agreements with bar associations provide that each association has the right to reject any advertising that is not consistent with its guidelines. Advertising is contained in a section entitled "Attorney Support Services" and follows a "yellow page" format in print directories and newsletters. On the Web sites, there is a link called Attorney Support Services which is accessed by the point and click of a mouse. Advertising sales are assisted by a letter of introduction from the bar association noting that the Company is publishing the directory and stating how many attorneys and judges will receive the directory. Like other forms of print advertising including newspaper and yellow pages, the Company offers a variety of possible advertisements ranging from inside front cover pages, full and partial pages or business card listings to simple classified line listings. The Company requires a 50% deposit upon approval by the advertiser of a proof and the balance is payable upon publication. A 10% discount is offered in exchange for full payment upon approval of a proof. The Company markets its sale of specialty listings and attorney home pages by direct mail and advertising in bar newsletters. It does not engage in telephone solicitation of attorneys. PRINTING The Company is not engaged in the printing of its bar directories and newsletters but subcontracts this work to independent printing companies. The Company believes that there is an ample supply of independent printers willing to perform quality printing services for the Company and that it will not be materially adversely affected by subcontracting its printing services. In doing so, the Company believes that it avoids the need to invest substantial sums of capital in printing and binding equipment and has more flexibility to meet its clients' specialized needs. BACKLOG The Company's backlog consists of advertising agreements for directories (including Web sites) and newsletters which have not been published. As of March 1, 1996, the Company's backlog was approximately $1,159,000 as compared to approximately $620,000 on March 1, 1995. Since the Company recognizes its revenues when it publishes its print bar directories and newsletters, it anticipates that all of the March 1, 1996 backlog will be recognized as revenues during the current fiscal year. SIGNIFICANT CLIENTS Although the Company does not derive its revenues directly from bar associations, advertising sales from the publication of two bar directories each accounted for more than 10% of the Company's revenues in fiscal 1995. The Company will not receive any revenues during the current fiscal year from the directory published by one of these bar associations due to that association's policy of publishing its directory every three years. Because of the Company's increasing backlog, the Company does not expect to be materially adversely affected by the absence of revenues from this bar association's directory. See "Business--The Company's Bar Directories." COMPETITION There are two levels of competition within the Company's business. The Company competes in obtaining agreements with bar associations to publish its directory or newsletter. Once the Company has contracts to publish, it faces substantial competition in the sale of advertising. There are three primary competitive factors which affect the Company's business--cost, service and product quality. The Company believes its primary competitive advantage is its ability to offer products and services at no cost to professional associations. As the publisher of the National Association of Bar Executives ("NABE") directory, the Company perceives that it has an additional competitive advantage in the marketing of bar directories to NABE 28 members. Individually, NABE's members generally are in a position to play an important role in the selection of local directory publishers. Each NABE member receives a NABE directory published by the Company which gives the Company increased visibility to these bar association executives. Print Directories The print bar directory market is highly segmented and localized. Other than Martindale-Hubbell, few competitors focus exclusively on legal directories. Martindale-Hubbell is a national directory of 25 large hardcover volumes. It costs $745 per year and cannot be purchased for a particular geographic area. However, on a national scale, Martindale-Hubbell is the pre-eminent name in the print bar directory business. For print directories covering a limited geographical area, the Company's principal competitor is believed to be Legal Directories Publishing Company ("LDP"), a privately-held company located in Dallas, Texas. LDP publishes state bar directories which it sells directly to attorneys and others who have a need for a state bar directory. LDP is believed to have significantly larger revenues than the Company. Other competitors include Elson-Alexandre, an affiliate of Western Photography Services, Inc. located in Buena Vista, California. Elson-Alexandre is primarily a portrait photographer and publishes the directories as an adjunct to its core business which is the sale of photographic packages. Electronic Services The Company also faces substantial competition in its plan to establish an Internet presence and sell Web sites to law firms and lawyers who are bar association members. The Company competes with businesses which have long established name recognition with lawyers. These competitors have significantly greater financial, marketing and other resources than the Company. West, the official publisher of all reported court cases, is used extensively for on-line legal research. West publishes its West Legal Directory in electronic form only. West's Legal Directory is a national compilation of credentials of people, organizations, and institutions associated with the legal profession. West provides a free listing of attorneys and judges in its electronic legal directory and offers a variety of techniques to search the listings. West also markets a customized Web site to law firms. The West Web site includes professional profiles and can, for a fee, provide customized marketing and other information. Another significant competitor on the Internet is LEXIS-NEXIS ("LEXIS"), second only to West in providing computerized legal research to lawyers. A LEXIS service, LEXIS Counsel Connect ("LCC") recently introduced a service on the Internet called Lawyer Search. LCC charges its members a fee of $180 which pays for membership and a listing on Lawyer Search. Both the traditional LEXIS legal research service and LCC can be accessed through a direct telephone connection or through the Internet. Martindale-Hubbell is available as a searchable on-line database through LEXIS and on CD-ROM. The electronic form of Martindale-Hubbell's directory is accessible through the Internet only as part of LEXIS services. Advertising Competition The Company competes with all forms of media which sell advertising--yellow pages, alternative yellow pages, specialty magazines, newspapers and television, among others. There are no significant barriers to entry by competitors. Since these potential competitors can enter the Company's business without substantial capital investment or industry experience, the Company is seeking to protect its competitive position through its co-operative payment program. See "Risk Factors--Competition", "Use of Proceeds" and "Business--Future Business Strategy." 29 FUTURE BUSINESS STRATEGY The Company's overall marketing strategy is to provide bar associations nationwide with the complete design and production of each association's Internet presence, print directory and monthly newsletter. Although no assurances can be given, the Company believes that such a package has the potential to allow the Company to increase its market share, since at this time, to the best of the Company's knowledge, no other single company currently offers all of these services to bar associations. The Company intends to capitalize on the ability to cross-sell additional services. Additionally, the Company intends to continue its current marketing strategy of using its existing clients as references for potential clients. With the proceeds of this offering, the Company intends to implement an aggressive national marketing plan to secure long-term agreements to publish print and electronic bar directories. The Company believes that the fragmented nature of the local print bar directory industry creates favorable acquisition opportunities. Accordingly, following this offering, the Company also intends to use a portion of the proceeds to acquire competitors in order to increase its market share. In addition to seeking to acquire competitors, the Company also will consider purchasing the long-term rights to publish larger bar directories. The Company currently has no intentions or understandings in this regard. See "Use of Proceeds." EMPLOYEES As of the date of this Prospectus, the Company has 48 full-time and six independent contractors, including its executive officers. The Company's staff is divided into eight people in administration, 27 account executives in sales and marketing, six graphic artists, five production assistants and two customer service representatives. None of the Company's employees or independent consultants are covered by a collective bargaining agreement. Management believes that the Company's relationship with its employees and contractors is excellent. The Company believes that the future success of the Company is dependent to a significant degree on its ability to retain existing employees and to attract and train additional skilled personnel, although there can be no assurances that it will be able to do so. FACILITIES The Company's offices occupy approximately 7,100 square feet located at 577 Deltona Boulevard, Deltona, Florida, 32725. The leases expire December 31, 1996 subject to a three-year option to renew. The Company does not anticipate problems in finding suitable office space if the lease is not renewed. See Note 5 to "Notes to Financial Statements." 30 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth certain information concerning the directors, proposed directors and executive officers of the Company:
NAME AGE POSITIONS - ------------------------------------------ --- ------------------------------------------ Peter S. Balise........................... 37 Chairman of the Board, President and Secretary D. Scott Plakon........................... 37 Executive Vice President, Treasurer and Director James M. Koller........................... 45 Chief Financial Officer Matt Butler............................... 37 Proposed Director(1) John D. McKey, Jr., Esq................... 52 Proposed Director(1)
- ------------ (1) Following this offering, Messrs. Butler and McKey have agreed to join the Board of Directors. PETER S. BALISE founded the Company and has been its President and Secretary since inception and was its Treasurer until March 1996. He was elected Chairman of the Board in March 1996 when the Company amended its Articles to provide that it would be managed by a Board of Directors rather than its shareholders. From prior to 1991 to September 1993, Mr. Balise was President of TPCNA. From September 1993 through March 15, 1994, Mr. Balise was an employee of TPCNA. D. SCOTT PLAKON has been the Company's Executive Vice President since September 1994 and has been Treasurer and a director since March 1996. From November 1990 through September 1994, Mr. Plakon was Branch Manager and Associate Vice President of Chatfield Dean & Co., Inc., a broker-dealer with its principal office located in Greenwood Village, Colorado. JAMES M. KOLLER has been the Company's Chief Financial Officer since January 1996. Prior to that time, from October 1990 through December 1995, Mr. Koller was Chief Financial Officer and Vice President of Kearney Systems, Inc., Orlando, Florida. MATT BUTLER will become a director of the Company following this offering. From November 1992 to date, Mr. Butler has been the Chairman and Chief Executive Officer of Butler Holdings, Inc., the parent company of Hunt Transportation, Inc., Omaha, Nebraska, which is engaged in the transportation of agricultural and construction machinery and equipment throughout the United States. Previously, from 1988 to November 1992, Mr. Butler was Vice President of Butler Holdings, Inc. JOHN D. MCKEY, JR., ESQ. will become a director of the Company following this offering. Mr. McKey has been a member of The Florida Bar since 1968. Since October 1993, he has been employed as an attorney by the law firm of McCarthy, Summers, Bobko, McKey, Wood & Sawyer. From July 1986 through October 1993, he was employed as an attorney by the law firm of Kohl, Bobko, McKey & Higgins. Mr. McKey is also a member of the board of directors of Laidlaw Holdings, Inc., the parent company of the Representative. MARK I. GOLDEN, previously a proposed director of the Company, has advised the Company that due to health problems he will be unable to serve on the Board of Directors. The Company's shareholders have approved an amendment to its Articles providing for a staggered Board of Directors designed to elect approximately one-third of the directors each year. This amendment will take effect following this offering when Messrs. Butler and McKey will join the Board of Directors. Initially, Class A directors will serve a three-year term, Class B directors will serve a two- 31 year term and Class C directors will serve a one-year term. Messrs. Balise and Plakon will be Class A directors, Mr. Butler will be a Class B director and Mr. McKey will be a Class C director, with their terms expiring in 1999, 1998 and 1997, respectively. For a three-year period from the date of this Prospectus, the Underwriter has the right to appoint a designee or an observer to the Company's Board of Directors. Mr. McKey will serve as a designee of the Underwriter. Officers are elected annually by the Board of Directors and serve at the discretion of the Board. The Company has applied for "key man" life insurance on the life of Mr. Balise in the amount of $2,000,000, and pursuant to an agreement with the Underwriter, is obligated to keep that policy in force for a minimum of three years from the date of this Prospectus. Upon completion of this offering, the Company will establish a compensation committee and an audit committee. The compensation committee will administer the Company's Plan and make recommendations to the full Board of Directors concerning compensation, including incentive arrangements, of the Company's officers and key employees. The compensation committee will be comprised of Messrs. Butler and McKey. The audit committee will review the engagement of the independent accountants and review the independence of it auditors. The audit committee will also review the audit and non-audit fees of the independent accountants and the adequacy of the Company's internal accounting controls. The audit committee will be comprised of Messrs. Butler and McKey. DIRECTORS' COMPENSATION Directors receive no cash compensation for serving on the Board of Directors other than reimbursement of reasonable out-of-pocket expenses incurred in connection with their attendance at Board of Directors' meetings. Pursuant to the Plan, directors who are not 10% shareholders or employees will receive a grant of Common Stock and non-qualified stock options as described below under "1996 Stock Plan." LIMITATION OF LIABILITY Under Florida law, the Company's directors are protected against personal liability for monetary damages from breaches of their duty of care. As a result, the Company's directors will not be liable in an action by the Company or a shareholder for monetary damages alleging negligence or gross negligence in the performance of their duties. In such actions, they remain liable for monetary damages for wilful misconduct, conscious disregard of the best interest of the Company, and for transactions from which a director derives an improper personal benefit. Directors also remain liable under another provision of Florida law which makes directors personally liable for unlawful distributions and expressly sets forth a negligence standard with respect to such liability. The liability of the Company's directors under federal or applicable state securities laws is also unaffected. The Company has applied for directors' liability insurance. While the Company's directors have protection from awards of monetary damages for breaches of fiduciary duty, that does not eliminate their fiduciary duty. Equitable remedies, such as an injunction or rescission based upon a director's breach of fiduciary duty, are still available. The Company has entered into Indemnification Agreements with each of its directors and executive officers. Each such Indemnification Agreement provides that the Company will indemnify the indemnitee against (or if requested advance to the Indemnitee) expenses including reasonable attorney's 32 fees, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him in connection with any civil or criminal action or administrative proceeding arising out of the performance of his duties as an officer, director, employee or agent of the Company. Indemnification is available if the acts of the indemnitee were in good faith, if the indemnitee acted in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal proceeding, the indemnitee had no reasonable cause to believe his conduct was unlawful. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. EXECUTIVE COMPENSATION The following table sets forth certain information with respect to the annual and long-term compensation of the Company's chief executive officer for the fiscal year ended December 31, 1995. No executive officer's total annual salary and bonus exceeded $100,000 for the fiscal year ended December 31, 1995. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION ------------------------------------ OTHER ANNUAL NAME AND PRINCIPAL POSITION YEAR SALARY($) COMPENSATION($) - ------------------------------------------------------------- ---- --------- --------------- Peter S. Balise, Chairman of the Board, President and Secretary.................................... 1995 $ 74,000 $ -0-(1)
- ------------ (1) Does not include approximately $174,000 in 1995 Subchapter S income due to Mr. Balise, of which approximately $70,000 has been distributed in connection with federal income taxes due and the remainder is evidenced by a note to Mr. Balise due in June 1997. See "Certain Transactions.' EMPLOYMENT AGREEMENTS Effective with the closing of this offering, the Company has entered into three-year written employment agreements with Messrs. Peter S. Balise and D. Scott Plakon. The agreements provide for base annual salaries of $100,000 and $96,000, respectively, subject to annual cost of living increases. Their employment agreements provide for annual bonuses at the discretion of the Board of Directors. Mr. Balise also is entitled to use a Company automobile. Currently, Messrs. Balise and Plakon receive annual salaries of $78,000 and $65,000, respectively, pursuant to oral agreements and Mr. Balise also has use of the Company's automobile. Mr. James M. Koller, the Company's Chief Financial Officer, receives a salary at the rate of $44,500 per annum pursuant to an oral agreement which will increase to $63,000 per year following the closing of this offering. Each of the Company's executive officers also receive full reimbursement of health insurance premiums rather than the one-half which all other employees receive. 1996 STOCK PLAN The Company has adopted (and the shareholders have approved) the Plan for employees, consultants and directors covering 500,000 shares of Common Stock. The Plan provides for the grant to employees of incentive stock options ("ISOs") within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and for the grant of non-qualified stock options (collectively "Options"). The Plan also provides for the grant of restricted Common Stock. 33 As of the date of this Prospectus, the Company has 108,500 outstanding Options exercisable at $5.50 per share (the initial public offering price) including 10,000 Options held by Mr. James M. Koller, the Company's Chief Financial Officer. All Options granted vest at the rate of one-fifth each December 31st commencing in 1996, subject to continued employment, except automatic grants to directors who are not employees or 10% shareholders, which will vest at the rate of one-third each December 31st subject to continued Board service. Once vested, Options may be forfeited under certain circumstances. The Plan is intended to comply with Section 16(b) of the Exchange Act and Rule 16b-3 promulgated thereunder and other applicable laws and is administered by the Board of Directors. The Board of Directors has the power to determine eligibility to receive Options, the terms of any Options including the exercise price, the number of shares subject to the Options, the vesting schedule and the term of any such Options. The exercise price of all Options granted under the Plan must be at least equal to the fair market value of the shares of Common Stock on the date of grant. With respect to any participant who owns Common Stock possessing more than 10% of the voting power of the Company's outstanding Common Stock, the exercise price of any ISO granted must equal at least 110% of the fair market value on the grant date and the maximum term of the ISO must not exceed five years. The terms of all other Options granted under the Plan may not exceed 10 years. The Plan provides for an automatic grant of 3,000 shares of Common Stock and 15,000 Options to any non-employee director who is not a 10% shareholder, which vest annually over a three-year term each December 31, provided that such person is still serving as a director on the vesting date. The sole consideration for the grant of the shares of Common Stock and Options consists of the service as a director. The exercise price of the Options is fair market value on the date each non-employee director becomes a director. Messrs. Matt Butler and John D. McKey, Jr., proposed directors of the Company will receive such grants following this offering. ADVISORY BOARD The Company has organized an Advisory Board with expertise in areas of relevance to the Company's business activities. The Company may consult with the Advisory Board members for assistance in the planning and implementation of its future business strategy. At least one meeting of the Advisory Board will be held each year in conjunction with a meeting of the Board of Directors of the Company. In addition, the Company may consult with individual members of the Advisory Board from time to time on business matters. Each Advisory Board member will receive 4,000 Options (exercisable at the offering price) vesting over a two-year period. DANIEL GOELZER, ESQ. is an attorney and a member of the law firm of Baker & McKenzie, resident in its Washington, D.C. office. Mr. Goelzer was the General Counsel of the Securities and Exchange Commission from 1983-1990. STEPHEN STRANG is the founder of Strang Communications Company, a publisher of materials for the evangelical Christian community. Strang Communications Company publishes books and five magazines and produces a national weekly cable television program. HAROLD W. STAYMAN is chairman of Epicurean Associates of America, Inc., a consulting organization serving the hospitality industry. Mr. Stayman has published restaurant guides and cookbooks. MILTON BINS is a professional management consultant specializing in small businesses, educational institutions and non-profit organizations. He is Chairman and Chief Executive Officer of the Douglas Policy Institute, a nonpartisan, tax-exempt education and research organization that focuses on major public policy issues. He has previously served as executive director of the Office of the White House Initiative on Historically Black Colleges and Universities ("HBCUs"), and director of the Office of Policy Development for Postsecondary Education of the U.S. Department of Education. From 1989 to 1993, he served on President Bush's Board of Advisors on HBCUs. 34 PRINCIPAL SHAREHOLDERS The following table sets forth as of the date of this Prospectus certain information as to the beneficial ownership of Common Stock of the Company by (i) each person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of Common Stock, (ii) each current and proposed director, (iii) each executive officer named in the Summary Compensation Table under the caption "Management-- Executive Compensation", and (iv) all executive officers and directors (including proposed directors) as a group.
PERCENTAGE OF OUTSTANDING CLASS AMOUNT AND OF COMMON STOCK NATURE OF --------------------------------------- NAME AND ADDRESS BENEFICIAL OWNED BENEFICIAL OWNER OWNERSHIP(1) PRIOR TO OFFERING AFTER OFFERING (2) - -------------------------------------------------- ------------ ----------------- ------------------ Peter S. Balise................................... 1,103,725 37.3% 27.9% 577 Deltona Blvd., 2nd Floor Deltona, Florida 32725 D. Scott Plakon................................... 669,725 22.6% 16.9% 577 Deltona Blvd., 2nd Floor Deltona, Florida 32725 James M. Koller................................... 2,700 * * 577 Deltona Blvd., 2nd Floor Deltona, Florida 32725 Matt Butler(3).................................... 68,000 2.2% 1.6% 10770 "I" Street Omaha, NE 68127 Mark I. Golden(4)................................. 446,000 15.1% 11.3% 1110 S.W. Ivanhoe Blvd., Unit 20 Orlando, FL 32804 John D. McKey, Jr., Esq.(3)....................... 8,000 * * 2081 E. Ocean Blvd., Second Floor Stuart, FL 34996 Phillip Hofmann(5)................................ 250,000 8.4% 6.3% 702 Commerce Circle Longwood, FL 32750 Alan R. Cohen..................................... 248,000 8.4% 6.3% 560 Sylvan Avenue, #330 Englewood Cliffs, NJ 07632 All Directors, Proposed Directors and Executive 1,852,150 62.6% 46.8% Officers of the Company as a Group (five persons)(3)
- ------------ * Less than 1%. (1) Unless otherwise indicated, the Company believes that all persons named in the table have sole voting and investment power with respect to all securities beneficially owned by them. A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from the date of the Prospectus upon the exercise of warrants or Options or the conversion of convertible securities. (2) No effect is given to the Over-Allotment Option. (3) Excludes 15,000 shares of Common Stock underlying Options to be granted to each of Messrs. Butler and McKey following this offering which are not exercisable within 60 days. (4) Includes 336,000 shares of Common Stock owned by Dr. Golden and his wife as tenants by the entireties and 100,000 shares of Common Stock owned by Dr. Golden's wife and 10,000 shares of Common Stock owned by his son. Dr. Golden disclaims any beneficial ownership as to the 100,000 and 10,000 shares. (5) Owned by Mr. Hofmann and his wife as tenants by the entireties. 35 CERTAIN TRANSACTIONS The Company elected to be taxed under Subchapter S of the Internal Revenue Code through December 31, 1995. In March 1996, the Company distributed to its shareholders an aggregate of approximately $179,000 representing their approximate tax liability for 1995 Subchapter S income and issued to such shareholders promissory notes due June 30, 1997 aggregating approximately $268,000 representing the balance of the 1995 Subchapter S income. See "Subchapter S Distributions." Mr. Peter S. Balise, the Company's President, and founder sold TPCNA (of which he was the sole shareholder) to Catalog in September 1993 in exchange for a $275,000 promissory note. On May 9, 1994, Mr. Balise entered into an agreement with Catalog through which the Company acquired the assets of TPCNA in exchange for the Company's assumption of certain of its liabilities and Mr. Balise released Catalog from the balance of the note payable to him. As a result of this transaction, the Company incurred a loss on this uncollectible note. See Notes 6 and 7 to Notes to "Financial Statements." Messrs. Matt Butler and John D. McKey, Jr. each purchased one Unit and Messrs. Peter S. Balise and James M. Koller each purchased a one-half Unit in the Private Placement. Their Notes shall be paid with the proceeds of this offering. Messrs. Balise, Butler, McKey, and Koller have agreed not to publicly sell the 15,000 shares contained in the Units for 13 months from the date of this Prospectus without the consent of the Representative. The Company has granted certain registration rights to permit the public sale of these 15,000 shares (and an additional 2,500 shares held by a non-affiliate) after expiration of the lock-up period. See "Use of Proceeds", "Management" and "Shares Eligible for Future Sale." CONCURRENT OFFERING The registration statement of which this Prospectus forms a part also includes a Prospectus with respect to an offering by the Selling Shareholders of 12,500 shares of the Selling Shareholders' Common Stock issued in connection with the March 1996 Private Placement, which may be sold in the open market, in privately negotiated transactions, or otherwise directly by the holders thereof, subject to the following contractual restrictions. Each Selling Shareholder has agreed not to sell, transfer or otherwise publicly dispose of the Selling Shareholders' Common Stock for up to 90 days from the date of this Prospectus without the prior written consent of the Underwriter. The Company will not receive any proceeds from the sale of any of the Selling Shareholders' Common Stock. Sales of the Selling Shareholders' Common Stock or the potential of such sales may have an adverse effect on the market price of the shares of Common Stock offered hereby. SUBCHAPTER S DISTRIBUTIONS The Company elected to be taxed under Subchapter S of the Internal Revenue Code through December 31, 1995. Accordingly, all income reported for tax purposes was taxable to the Company's shareholders. For the year ended December 31, 1995, the Company reported taxable income of approximately $447,000. Of this amount in March 1996, the Company distributed to its shareholders an aggregate of approximately $179,000 in order to permit such shareholders to pay the approximate amount of federal income taxes owed on the 1995 taxable income. Messrs. Peter S. Balise, D. Scott Plakon, Mark Golden and Phillip Hofmann received approximately $70,000, $46,500, $46,500 and $16,000, respectively. Additionally, the remainder of the 1995 Subchapter S income was distributed to the Company's shareholders through promissory notes bearing 8% per annum interest due on June 30, 1997. Messrs. Balise, Plakon, Golden and Hofmann received notes in the sums of approximately $105,000, $70,000, $70,000 and $24,000, respectively. 36 DESCRIPTION OF SECURITIES The following summary description of the Company's capital stock is qualified in its entirety by reference to the Company's Articles. COMMON STOCK The authorized capital stock of the Company consists of an aggregate of 15,000,000 shares of Common Stock, no par value. As of the date of this Prospectus, there are 2,961,000 shares of Common Stock outstanding. Holders of Common Stock are entitled to have one vote per share held of record on each matter submitted to a vote of the shareholders. Holders of the Common Stock do not have preemptive rights to purchase additional shares of Common Stock or other subscription rights. The Common Stock carries no conversion rights and is not subject to redemption or to any sinking fund provisions. All shares of Common Stock are entitled to share equally in dividends from legally available sources as determined by the Board of Directors. Upon dissolution or liquidation of the Company, whether voluntary or involuntary, holders of the Common Stock are entitled to receive assets of the Company available for distribution to the shareholders. All outstanding shares of Common Stock are, and the shares of Common Stock offered hereby will be, upon completion of this offering, validly authorized and issued, fully paid and non-assessable. The executive officers and the directors of the Company will beneficially own 57.4% of the outstanding shares of Common Stock following this offering. However, as no voting agreements exist among these executive officers and directors, each is able to vote as he may desire on any issue affecting the Company. See "Principal Shareholders." ANTI-TAKEOVER PROVISIONS OF FLORIDA LAW The Company may be subject to the affiliated transaction ("Affiliated") and the control-share acquisition provisions of Sections 607.0901 and 607.0902 of the Florida Business Corporation Act (the "Act"). The Affiliated provisions of the Act are designed to restrict the occurrence of highly coercive takeovers. It also limits certain related party transactions otherwise permissible under the Act. The law specifically provides that certain transactions between a Florida corporation and an interested shareholder or affiliate or associate of the interested shareholder (the "Interested Shareholder"), defined as any person who beneficially owns more than 10% of the outstanding voting shares of the corporation, must be approved by the affirmative vote of at least two-thirds of the holders of the other voting shares (the "Disinterested Shareholders"). Transactions that require the approval of two-thirds of the voting shares beneficially owned by Disinterested Shareholders include (1) mergers or consolidations with the Interested Shareholder; (2) the sale, lease, exchange, mortgage, pledge, transfer, or other disposition to the Interested Shareholder of five percent or more of either the corporation's total assets or total outstanding shares, or representing five percent or more of the earning power or net income of the corporation; (3) issuance or transfers of shares to the Interested Shareholder having a market value of five percent or more of the total market value of the corporation's outstanding shares (except pursuant to the exercise of stock warrants or rights, or a dividend or distribution pro-rata to all shareholders); (4) a liquidation or dissolution of the corporation proposed by or pursuant to in a written or unwritten agreement or understanding with the Interested Shareholder; (5) a reclassification of securities or other corporate reorganization with the Interested Shareholder that has the effect of increasing the percentage voting ownership of the Interested Shareholder by more than five percent; and (6) any receipt by the Interested Shareholder of a benefit, directly or indirectly, of any loans, advances, guarantees, pledges, other financial assistance, or tax credits or advantages provided by or through the corporation. 37 Transactions that are approved by majority of disinterested directors are exempted from the above shareholder approval requirement. A "Disinterested Director" is defined to mean any person who was a member of the corporation's Board of Directors before the date the Interested Shareholder became the beneficial owner of more than 10% of the outstanding voting shares of the corporation, or anyone who subsequently becomes a member of the Board of Directors with the approval of the majority of the Disinterested Directors. There are currently no Disinterested Directors on the Company's Board and therefore an affiliated transaction may be approved only by a two-thirds vote of the Company's Disinterested Shareholders, unless at any time during the three years preceding the transaction, the Company has had 300 or less shareholders of record. The control share acquisition provisions generally provide that control shares of an issuing public corporation acquired in a control share acquisition have no voting rights until voting rights are granted by a resolution approved by a majority of shares entitled to vote excluding control shares. Control share acquisition provisions apply to Issuing Public Corporations which are defined to include corporations with (i) 100 or more shareholders, excluding all nominees or brokers, (ii) its principal offices in Florida, and (iii) more than 10% of its shares of Common Stock owned by Florida residents. "Control Shares" are defined as shares of Common Stock that, when acquired and added to other shares owned by a person, enable that person to exercise voting power with respect to shares of an Issuing Public Corporation within the ranges of one-fifth to one-third, one-third to one-half, and one-half or more of the outstanding voting power. This term does not include all shares owned by the person but only those shares acquired to put the shareholder "over the top" with respect to that particular range. The Act provides that shares acquired within any 90-day period either before or after purchase are considered to be one acquisition. Approval of voting rights requires (i) approval by each class entitled to vote separately, by majority vote; and (ii) approval by each class or series entitled to vote separately, by a majority of all votes entitled to be cast by that group excluding all Control Shares. If an acquiring person proposes to make or has made a Control Share acquisition, he may deliver to the Issuing Public Corporation an acquiring person's statement ("APS"). The acquiring person may then request that the Issuing Public Corporation call a special meeting of the shareholders at the acquiring person's expense to consider granting rights to the Control Shares. If no APS has been filed, any Control Shares acquired in a Control Share acquisition by such person may, after 60 days has passed since the last acquisition of Control Shares, be redeemed at their fair market value. If an APS is filed, the shares are not subject to redemption unless the shares are not accorded full voting rights by shareholders. The effect and intent of the Control Share acquisition provision is to deter corporate takeovers. Therefore, it is more likely than not that control of the Company will remain in the hands of the existing principal shareholders. See "Principal Shareholders." MARKET FOR COMMON STOCK--DIVIDEND POLICY Prior to this offering, there has been no public market for the Company's Common Stock. As of the date of this Prospectus, the Company has 60 shareholders. For its fiscal years prior to 1996, the Company's shareholders elected to be taxed under Subchapter S of the Internal Revenue Code, and, prior to 1996, all earnings of the Company were distributed to its shareholders. The Company intends to retain future earnings, if any, to finance the development and expansion of its business and does not contemplate paying any dividends on its Common Stock in the foreseeable future. See "Risk Factors-- Absence of Public Market", "Risk Factors--No Dividends Anticipated" and "Subchapter S Distributions." 38 TRANSFER AGENT The Transfer Agent for the Common Stock is American Stock Transfer & Trust Company, 40 Wall Street, New York, NY, 10005. LISTING ON NMS The Company has been approved for quotation on the NMS using the symbol PCNA for listing on NMS. No assurances can be given that an active trading market for the Common Stock will develop or at what price the Common Stock will trade. See "Risk Factors." SHARES ELIGIBLE FOR FUTURE SALE All of the 2,961,000 shares of Common Stock presently outstanding are "restricted securities" as that term is defined under the Securities Act and may only be sold pursuant to a registration statement or in compliance with Rule 144 under the Securities Act or other exemption from registration. Rule 144 provides, in essence, that a person holding restricted Common Stock for a period of two years may sell such securities during any three month period, subject to certain exceptions, in amounts equal to the greater of (i) one percent (1%) of the Company's issued and outstanding Common Stock, or (ii) the average weekly trading volume of the Common Stock during the four calendar weeks prior to the filing of the required Form 144. Rule 144 also permits, under certain circumstances, the sale of shares without any quantity limitation by a person who is not an affiliate of the Company and who has satisfied a three-year holding period. Last year, the Commission proposed to amend Rule 144 by reducing the two and three year holding periods to one and two years, respectively. The Company cannot predict whether this proposed amendment will be adopted. All of the Company's executive officers, current and proposed directors and certain other shareholders who own an aggregate of 2,932,500 shares (including 17,500 shares purchased in the Private Placement), have agreed not to publicly sell such shares of the Company's Common Stock for a period of 13 months from the date of this Prospectus without the Representative's prior written consent. After expiration of these lock-up agreements, all outstanding shares of Common Stock will be eligible for sale under Rule 144 except for 150,550 shares and the 30,000 shares acquired in the Private Placement. Of these 30,000 shares of Common Stock, the Company has agreed to register 17,500 shares of Common Stock in order to permit their public sale following expiration of the lock-up agreements. In addition, 12,500 shares of Common Stock issued to five shareholders in the Private Placement are eligible for sale pursuant to the Selling Shareholders' Prospectus. However, the holders of these 12,500 shares of Common Stock have agreed not to sell such shares without the prior consent of the Representative for up to 90 days from the date of this Prospectus. In January 1997, 16,000 shares of Common Stock not subject to any lock-up agreement may be sold pursuant to Rule 144. The 150,550 shares of Common Stock will become eligible for sale under Rule 144 beginning in March and April 1998. In addition to these shares, the shares of Common Stock issuable upon exercise of 109,000 outstanding Options (including 10,000 Options held by the Company's Chief Financial Officer) may be publicly sold, once vested, commencing 90 days from the date of this Prospectus pursuant to Rule 701 under the Securities Act. However, holders of these Options have agreed not to sell any of the shares of Common Stock underlying the Options until 13 months from the date of this Prospectus. The availability for sale of substantial amounts of Common Stock subsequent to this offering could adversely affect the prevailing market price of the Common Stock and could impair the Company's ability to raise additional capital through the sale of its equity securities. See "Principal Shareholders", "Concurrent Offering", and "Certain Transactions." The Representative also has demand and piggyback registration rights with respect to the Common Stock underlying the Representative's Warrants. 39 No prediction can be made as to the effect, if any, that public sales of shares of the Company's Common Stock or the availability of such Common Stock for sale will have on the market prices of such Common Stock prevailing from time to time. Nevertheless, the possibility that substantial amounts of Common Stock may be sold in the public market may adversely affect prevailing market prices for Common Stock and could impair the Company's ability in the future to raise additional capital through the sale of its equity securities. See "Risk Factors-- Shares Eligible for Future Sale and Registration Rights." 40 UNDERWRITING The Underwriters named below (the "Underwriters") have severally agreed, subject to the terms and conditions of the Underwriting Agreement between the Company and the Underwriters (the "Underwriting Agreement"), to purchase from the Company, and the Company has agreed to sell to the Underwriters, the number of shares set forth opposite their names in the table below at the price set forth on the cover page of this Prospectus: NUMBER OF UNDERWRITERS SHARES - ---------------------------------------------------------------- --------- Laidlaw Equities, Inc. ......................................... Total..................................................... 1,000,000 --------- --------- A copy of the Underwriting Agreement has been filed as an exhibit to the registration statement (the "Registration Statement") to which reference is hereby made. The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions. The Underwriters shall be obligated to purchase all of such shares if any are purchased. The Underwriters have advised the Company that the Underwriters propose to offer such shares to the public at the public offering price set forth on the cover page of this Prospectus and that they may allow certain dealers who are members of the National Association of Securities Dealers, Inc. ("NASD"), and to certain foreign dealers, concessions of not in excess of $. per share, of which amount a sum not in excess of $. per share may in turn be reallowed by such dealers to other dealers who are members of the NASD and to certain foreign dealers. After the commencement of this offering, the concessions and the reallowances may be changed by the Underwriters. The offering price of the Common Stock was determined by negotiation between the Company and the Representative. Among the factors considered in such negotiations were (i) an assessment of the Company's future prospects, (ii) the experience of the Company's management, (iii) the current financial position of the Company, and (iv) the prevailing conditions in the securities markets, including the market value of publicly-traded common stock of companies in similar industries, the market conditions for new offerings of securities and the demand for similar securities of comparable companies. The Underwriting Agreement provides for reciprocal indemnification between the Company and the Underwriters against certain liabilities under the Securities Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. The Company has agreed to pay to the Representative an expense allowance, on a non-accountable basis, equal to 3% of the gross proceeds derived from the sale of Common Stock. The Company paid an advance on such allowance in the amount of $50,000. The Company has also agreed to pay all of its expenses in connection with this offering, including expenses in connection with qualifying the Common Stock offered hereby for sale under the laws of such states as the Underwriters may designate. In addition, the Company will sell to the Representative, and to its designees, for nominal consideration, warrants to purchase an aggregate of 95,000 shares of Common Stock exercisable at 120% of the offering price. See "Underwriting--Representative's Warrants." 41 Current shareholders of the Company owning 2,932,500 and 12,500 shares of Common Stock, respectively, have agreed not to publicly sell or otherwise dispose of their shares of Common Stock without the prior consent of the Representative for a period of 13 months and 90 days, respectively, from the date of this Prospectus. OVER-ALLOTMENT OPTION The Company has granted the Underwriters the Over-Allotment Option, exercisable during the 45-day period commencing on the date of this Prospectus, to purchase up to 150,000 shares of Common Stock, solely to cover over-allotments. In such case, the purchase price per share will be the initial public offering price, less underwriting discounts. Purchases of shares of Common Stock upon exercise of the Over-Allotment Option will result in the realization of additional compensation by the Underwriters. REPRESENTATIVE'S WARRANTS In connection with this offering, the Company has agreed to sell to the Representative, for nominal consideration, the Representative's Warrants. The Representative's Warrants are exercisable for a period of four years commencing one year from the date hereof at an exercise price per share ("Exercise Price") of 120% of the public offering price per share. The Representative's Warrants may not be sold, transferred, assigned, pledged, or hypothecated for a period of 12 months from the date of this Prospectus except to officers or partners and other members of the underwriting or selling group and officers or partners thereof in compliance with the applicable provisions of the Corporate Financing Rule of the NASD. The Representative's Warrants contain anti-dilution provisions providing for adjustment of the Exercise Price upon the occurrence of certain events, including recapitalizations, mergers, consolidations and combinations. The holders of the Representative's Warrants have no voting, dividend, or other rights as shareholders of the Company with respect to shares of Common Stock underlying the Representative's Warrants, unless the Representative's Warrants have been exercised. A new Registration Statement or post-effective amendment to the Registration Statement will be required to be filed and declared effective before distribution to the public of the shares of Common Stock issuable upon exercise of the Representative's Warrants (the "Warrant Shares"). The Company has agreed, on one occasion when requested, to make all necessary filings to permit a public offering of the Warrant Shares during the period beginning one year after the date hereof and ending four years thereafter and to use its best efforts to cause such filing to become effective under the Securities Act and remain effective under such Act for a period of 120 days. In addition, the Company has agreed for the period starting at the beginning of the second year after the date hereof and ending at the conclusion of the fifth year after the date hereof to give advance notice to holders of the Warrant Shares of its intention to file a Registration Statement, and in such case, the Representative shall have the right to require the Company to include the Warrant Shares in such Registration Statement at the Company's expense. During the period that the Representative's Warrants are exercisable, the Representative and any transferee will have the opportunity to profit from a rise in the market price of the Common Stock with a resulting dilution in the interest of other shareholders. In addition, the terms on which the Company will be able to obtain additional capital during the exercise period may be adversely affected insofar as the Representative is likely to exercise the Representative's Warrants at a time when the Company would, in all likelihood, be able to obtain capital by a new offering of securities on terms more favorable than those provided by the terms of the Representative's Warrants. DESIGNEE TO THE BOARD Following this offering, John D. McKey, Jr., Esq. will serve as a member of the Board of Directors of the Company as the designee of the Underwriter. Mr. McKey is a member of the Board of Directors of Laidlaw Holdings, Inc. which is the parent company of the Underwriter. See "Management." 42 LEGAL MATTERS The validity of the Common Stock offered hereby will be passed upon for the Company by Cohen, Chernay, Norris, Weinberger & Harris, 712 U.S. Highway One, Suite 400, North Palm Beach, Florida, 33408. Two lawyers employed by that firm beneficially together own 7,500 shares of the Company's Common Stock and together own a $25,000 Bridge Note. Atlas, Pearlman, Trop & Brokson, P.A., 200 East Las Olas Blvd., Ft. Lauderdale, Florida, 33301, has acted as counsel to the Underwriter in connection with this offering. EXPERTS The financial statements of The Publishing Company of North America, Inc. at December 31, 1995 and for each of the two years in the period ended December 31, 1995 and Catalog Publishing Group, Inc.'s schedule of direct revenues and direct operating expenses for the period January 1, 1994 through May 9, 1994, appearing in the Prospectus and Registration Statement have been audited by Ernst & Young, LLP, independent auditors, as set forth in their reports thereon appearing elsewhere herein, and are included in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. ADDITIONAL INFORMATION The Company has filed with the Commission a Registration Statement on Form SB-2 under the Securities Act with respect to Common Stock offered by this Prospectus. This Prospectus, filed as a part of such Registration Statement, does not contain all of the information set forth in, or annexed as exhibits to, the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. As of the date of this Prospectus, the Company has become subject to the reporting requirements of the Exchange Act, and will be required to file reports, proxy and information statements and other information with the Commission. The Company intends to furnish its shareholders with annual reports containing audited financial statements and such other reports as the Company deems appropriate or as may be required by law. For further information with respect to the Company and this offering, reference is made to the Registration Statement including the exhibits filed therewith, which may be inspected without charge at the following offices of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549; 1400 Citicorp Center, 500 West Madison, Chicago, Illinois 60661; and 7 World Trade Center, New York, New York 10048. Copies of the Registration Statement and the other reports and information referred to herein may be obtained from the Commission at its principal office upon payment of prescribed fees. Statements contained in this Prospectus as to the contents of any contract or other document are not necessarily complete and, where the contract or other document has been filed as an exhibit to the Registration Statement, each statement is qualified in all respects by reference to the applicable document filed with the Commission. 43 THE PUBLISHING COMPANY OF NORTH AMERICA, INC. INDEX TO FINANCIAL STATEMENTS CONTENTS Report of Independent Auditors....................................... F-2 Balance Sheets....................................................... F-3 Statements of Income................................................. F-4 Statements of Shareholders' Equity................................... F-5 Statements of Cash Flows............................................. F-6 Notes to Financial Statements........................................ F-7 F-1 REPORT OF INDEPENDENT AUDITORS The Board of Directors The Publishing Company of North America, Inc. We have audited the accompanying balance sheets of The Publishing Company of North America, Inc. as of December 31, 1995 and 1994, and the related statements of income, shareholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Publishing Company of North America, Inc. at December 31, 1995 and 1994, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Orlando, Florida January 12, 1996, except for Note 9, as to which the date is March 8, 1996 F-2 THE PUBLISHING COMPANY OF NORTH AMERICA, INC. BALANCE SHEETS
DECEMBER 31 MARCH 31 -------------------- ---------------------- 1994 1995 1995 1996 -------- -------- -------- ---------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents...................... $ 15,524 $286,023 $ 93,293 $ 283,515 Accounts receivable, less allowance for doubtful accounts of $37,755 at December 31, 1995 and March 31, 1996...................... 81,395 317,012 8,751 548,952 Securities available-for-sale.................. -- 16,500 33,840 16,500 Directories in progress........................ 55,131 87,618 74,720 44,120 Other current assets........................... 15,783 16,747 6,859 9,362 -------- -------- -------- ---------- Total current assets............................. 167,833 723,900 217,463 902,449 Property and equipment, net...................... 66,383 169,200 75,756 203,211 Deferred offering costs.......................... -- -- -- 136,827 -------- -------- -------- ---------- Total assets..................................... $234,216 $893,100 $293,219 $1,242,487 -------- -------- -------- ---------- -------- -------- -------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable............................... $ 21,000 $ 73,085 $ 29,762 $ 51,056 Accrued expenses............................... -- -- -- 53,255 Deferred revenue............................... 164,570 270,257 328,192 132,488 Income taxes payable........................... -- -- -- 21,000 Deferred income taxes.......................... -- -- -- 126,110 Bridge notes................................... -- -- -- 242,222 Due to shareholder............................. 13,610 -- -- -- -------- -------- -------- ---------- Total current liabilities........................ 199,180 343,342 357,954 626,131 Promissory notes to shareholders-including accrued interest............................... -- -- -- 269,248 Deferred income taxes............................ -- -- -- 19,000 Shareholders' equity: Common shares, no par value: 15,000,000 shares authorized, 2,925,000 shares issued and outstanding in 1994 and 1995, 2,955,000 shares issued and outstanding in 1996........ 100 100 100 197,878 Unrealized loss on available-for-sale securities....................................... -- (17,520) -- (17,520) Retained earnings (accumulated deficit)........ 34,936 567,178 (64,835) 147,750 -------- -------- -------- ---------- Total shareholders' equity (net capital deficiency)...................................... 35,036 549,758 (64,735) 328,108 -------- -------- -------- ---------- Total liabilities and shareholders' equity....... $234,216 $893,100 $293,219 $1,242,487 -------- -------- -------- ---------- -------- -------- -------- ----------
See accompanying notes. F-3 THE PUBLISHING COMPANY OF NORTH AMERICA, INC. STATEMENTS OF INCOME
THREE MONTHS ENDED YEAR ENDED DECEMBER 31 MARCH 31 ------------------------ ------------------------ 1994 1995 1995 1996 ---------- ---------- ---------- ---------- (UNAUDITED) Net sales.................................. $ 465,936 $1,949,266 $ 89,234 $ 978,677 Cost and expenses: Salaries and commissions................. 190,507 817,764 82,078 312,615 Materials and printing................... 58,652 247,978 10,891 127,084 Depreciation............................. 5,955 37,723 4,549 16,936 Other operating costs.................... 168,473 280,252 44,563 195,184 ---------- ---------- ---------- ---------- 423,587 1,383,717 142,081 651,819 ---------- ---------- ---------- ---------- Income (loss) from operations.............. 42,349 565,549 (52,847) 326,858 Other income (expense): Loss on uncollectible note............... (100,553) -- -- -- Interest expense......................... -- -- -- (19,575) Other.................................... 2,895 14,697 1,080 6,577 ---------- ---------- ---------- ---------- Income (loss) before provision for income taxes...................................... (55,309) 580,246 (51,767) 313,860 Provision for income taxes................. -- -- -- 166,110 ---------- ---------- ---------- ---------- Net income (loss).......................... $ (55,309) $ 580,246 $ (51,767) $ 147,750 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income per share....................... $ -- $ -- $ -- $ .05 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Shares used in computation of net income per share................................ -- -- -- 2,955,000 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Pro forma data (unaudited): Net income (loss) before pro forma provision (benefit) for income taxes....... $ (55,309) $ 580,246 $ (51,767) $ 313,860 Pro forma provision (benefit) for income taxes...................................... 11,850 218,700 (19,480) 118,000 ---------- ---------- ---------- ---------- Pro forma net income (loss).............. (67,159) 361,546 (32,287) 195,860 Pro forma net income (loss) per share...... $ (.02) $ .12 $ (.01) $ .07 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Shares used in computation of pro forma net income (loss) per share.................... 2,955,000 2,955,000 2,955,000 2,955,000 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
See accompanying notes. F-4 THE PUBLISHING COMPANY OF NORTH AMERICA, INC. STATEMENT OF SHAREHOLDERS' EQUITY
COMMON UNREALIZED RETAINED STOCK LOSS EARNINGS TOTAL -------- ---------- -------- -------- Balance at January 1, 1994........................ $ 100 $ -- $251,749 $251,849 Net loss........................................ -- -- (55,309) (55,309) Shareholder distributions....................... -- -- (161,504) (161,504) -------- ---------- -------- -------- Balance at December 31, 1994...................... 100 -- 34,936 35,036 Unrealized holding loss on available-for-sale security.......................................... -- (17,520) -- (17,520) Shareholder distributions....................... -- -- (48,004) (48,004) Net income...................................... -- -- 580,246 580,246 -------- ---------- -------- -------- Balance at December 31, 1995...................... 100 (17,520) 567,178 549,758 Net income (unaudited).......................... -- -- 147,750 147,750 Shareholder distributions (unaudited)........... -- -- (447,178) (447,178) Issuance of common stock (unaudited)............ 77,778 -- -- 77,778 Transfer of undistributed earnings.............. 120,000 -- (120,000) -- -------- ---------- -------- -------- Balance at March 31, 1996 (unaudited)............. $197,878 $ (17,520) $147,750 $328,108 -------- ---------- -------- -------- -------- ---------- -------- --------
See accompanying notes. F-5 THE PUBLISHING COMPANY OF NORTH AMERICA, INC. STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER THREE MONTHS ENDED 31 MARCH 31 -------------------- -------------------- 1994 1995 1995 1996 -------- -------- -------- -------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss)................................. $(55,309) $580,246 $(51,767) $147,750 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation.................................... 5,955 37,723 4,549 16,936 Bad debt expense................................ 21,218 48,987 1,785 -- Loss on uncollectible note...................... 100,553 -- -- -- Provision for deferred income taxes............. -- -- -- 145,110 Exchange of advertising for machinery and equipment......................................... (5,654) (11,778) -- -- Gain on sale of securities...................... (2,500) (7,713) -- -- Accretion of bridge notes....................... -- -- -- 20,000 Interest accrued on promissory notes to shareholders...................................... -- -- -- 941 (Increase) decrease in accounts receivable...... 21,539 (284,604) 70,859 (231,940) (Increase) decrease in directories in progress.......................................... (23,947) (32,487) (19,589) 43,498 (Increase) decrease in other current assets..... (15,783) (964) 8,924 7,385 Increase (decrease) in accounts payable......... (61,090) 52,085 8,762 (22,029) Increase in accrued expenses.................... -- -- -- 53,255 Increase (decrease) in deferred revenue......... 120,682 105,687 163,622 (137,769) Increase in income taxes payable................ -- -- -- 21,000 -------- -------- -------- -------- Net cash provided by operating activities......... 105,664 487,182 187,145 64,137 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of securities available-for-sale......... (26,563) (67,860) (33,840) -- Sales of securities available-for-sale............ 29,063 41,553 -- -- Purchases of property and equipment............... (66,684) (128,762) (13,922) (50,947) -------- -------- -------- -------- Net cash used in investing activities............. (64,184) (155,069) (47,762) (50,947) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from bridge notes and common stock....... -- -- -- 300,000 Proceeds from shareholder advances................ 15,351 -- -- -- Repayment of shareholder advances................. (40,000) (13,610) (13,610) -- Shareholder distributions......................... -- (48,004) (48,004) (178,871) Deferred offering costs........................... -- -- -- (136,827) -------- -------- -------- -------- Net cash used in financing activities............. (24,649) (61,614) (61,614) (15,698) -------- -------- -------- -------- Net increase (decrease) in cash and cash equivalents....................................... 16,831 270,499 77,769 (2,508) Cash and cash equivalents at beginning of year.... (1,307) 15,524 15,524 286,023 -------- -------- -------- -------- Cash and cash equivalents at end of year.......... $ 15,524 $286,023 $ 93,293 $283,515 -------- -------- -------- -------- -------- -------- -------- -------- SUPPLEMENTAL CASH FLOW INFORMATION................ Shareholder distributions in satisfaction of amounts due from shareholder.................... $161,504 $ -- $ -- $ -- -------- -------- -------- -------- -------- -------- -------- -------- Assumption of liabilities and reduction of note receivable for accounts receivable and directories in progress......................... $122,875 $ -- $ -- $ -- -------- -------- -------- -------- -------- -------- -------- -------- Reduction of note receivable through advances to shareholder....................................... $ 45,808 $ -- $ -- $ -- -------- -------- -------- -------- -------- -------- -------- -------- Exchange of advertising for supplies.............. $ 2,373 $ 26,649 $ -- $ -- -------- -------- -------- -------- -------- -------- -------- -------- Distribution to shareholders in exchange for promissory notes................................ $ -- $ -- $ -- $268,307 -------- -------- -------- -------- -------- -------- -------- --------
See accompanying notes. F-6 THE PUBLISHING COMPANY OF NORTH AMERICA, INC. NOTES TO FINANCIAL STATEMENTS (INFORMATION AS OF MARCH 31, 1995 AND 1996 AND FOR THE THREE MONTHS THEN ENDED IS UNAUDITED) 1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION The financial statements include the accounts of The Publishing Company of North America, Inc. (the Company) and the publishing activities conducted personally by its principal shareholder from January 1, 1994 through May 9, 1994. Subsequent to May 9, 1994 publication and related activities were performed exclusively by the Company. NATURE OF BUSINESS The Company began operations on September 30, 1993. The primary business activity of the Company is publishing membership directories for bar associations and selling advertising in those directories. The Company markets its directories to domestic associations with a concentration in southeastern states. During 1995, advertising sales from the publication of two bar directories each accounted for more than 10% of the Company's revenues. INTERIM FINANCIAL INFORMATION The financial information as of March 31, 1995 and 1996 and for the three months then ended is unaudited, but includes all adjustments (consisting only of normal recurring accruals) which in the opinion of management are necessary in order to make the financial statements not misleading at such dates and for those periods. Operating results for the three months ended March 31, 1996 are not necessarily indicative of the results that may be expected for the entire year. CASH AND CASH EQUIVALENTS The Company considers all highly-liquid investments with a maturity of three months or less when purchased to be cash equivalents. ACCOUNTS RECEIVABLE Accounts receivable are comprised primarily of amounts due from advertisers in the bar association directories. Bad debt expenses are provided for in the financial statements and have been within management's expectations. SECURITIES AVAILABLE-FOR-SALE Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in a separate component of shareholders' equity. Realized gains and losses and declines in value judged to be other-than-temporary are included in investment income. The cost of securities sold is based on the specific identification method. Interest and dividends are included in investment income. PROPERTY AND EQUIPMENT Property and equipment are recorded at cost. Depreciation for machinery and equipment and office furniture and fixtures is computed using a 150% accelerated depreciation method over the useful lives of the related assets. Leasehold improvements are depreciated using the straight line method over the remaining lease term. Machinery and equipment and office furniture and fixtures are depreciated over five years. F-7 THE PUBLISHING COMPANY OF NORTH AMERICA, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) (INFORMATION AS OF MARCH 31, 1995 AND 1996 AND FOR THE THREE MONTHS THEN ENDED IS UNAUDITED) 1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) Expenditures for maintenance and repairs are charged to expense as incurred. Major improvements are capitalized. DEFERRED OFFERING COSTS Fees and expenses incurred through March 31, 1996, related to the Company's proposed initial public offering of its common stock have been capitalized and will be charged against the proceeds therefrom. If the proposed offering is not consummated, the deferred offering costs will be charged to expense. REVENUE RECOGNITION Revenues and related costs are recorded by the Company upon shipment of directories. Costs accumulated under directories in progress are stated at estimated costs, not in excess of estimated realizable value. Deferred revenue represents amounts received from advertisers prior to shipment of the related directories. INCOME TAXES From inception through December 31, 1995, the Company elected by consent of its shareholders to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those The Publishing Company of North America, Inc. provisions, the Company does not pay Federal corporate income taxes on its taxable income. Instead, the shareholders are liable for individual federal income taxes on the Company's taxable income. Effective January 1, 1996, the Company terminated its S Corporation status and in connection therewith, the Company recorded $48,110 in deferred tax liabilities as of January 1, 1996, through a charge to the statement of income. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. ADVERTISING COSTS The costs of advertising are expensed as incurred. For the years ended December 31, 1994 and 1995, advertising costs included in other operating costs were $257 and $13,762, respectively. EARNINGS PER SHARE Pro forma net income per share is computed based on the weighted average number of common shares outstanding. In accordance with the Securities and Exchange Commission requirements, common and common equivalent shares issued during the 12-month period prior to the filing of an initial public offering have been included in the calculation as if they were outstanding for all periods presented using the treasury stock method and the initial public offering price. Historical net income per share is not considered meaningful for the periods ended prior to January 1, 1996; accordingly, such per share information is not presented for such periods. Pro forma net income per share for the three months ended March 31, 1996 is provided to show the effect on the historical financial information had the Company operated as a C Corporation since inception and excludes the $48,110 charge to income in connection with the termination of its S Corporation status on January 1, 1996. F-8 THE PUBLISHING COMPANY OF NORTH AMERICA, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) (INFORMATION AS OF MARCH 31, 1995 AND 1996 AND FOR THE THREE MONTHS THEN ENDED IS UNAUDITED) 2. INVESTMENTS The Company's cost of equity securities owned is $34,020 and $0 at December 31, 1995 and 1994, respectively, and $34,020 and $33,840 at March 31, 1996 and 1995, respectively. The gross unrealized loss amounts to $17,520 in 1995. The gross realized gains on sales of available-for-sale securities totaled $7,713 and $2,500, respectively, in 1995 and 1994. The net adjustment to unrealized holding gains (losses) on available-for-sale securities included as a separate component of shareholders' equity totals $(17,520) in 1995. 3. PROPERTY AND EQUIPMENT Property and equipment consist of the following:
DECEMBER 31 MARCH 31 ------------------- -------------------- 1994 1995 1995 1996 ------- -------- -------- -------- Machinery and equipment........... $55,725 $183,386 $ 66,222 $203,218 Leasehold improvements............ 10,286 11,973 10,491 12,149 Office furniture and equipment.... 6,327 17,594 9,547 17,594 Vehicle........................... -- -- -- 30,939 ------- -------- -------- -------- 72,338 212,953 86,260 263,900 Less accumulated depreciation..... (5,955) (43,753) (10,504) (60,689) ------- -------- -------- -------- $66,383 $169,200 $ 75,756 $203,211 ------- -------- -------- -------- ------- -------- -------- --------
4. INCOME TAXES From inception through December 31, 1995, the Company elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the Company does not pay Federal corporate income taxes on its taxable income. Instead, the shareholders are liable for individual federal income taxes on the Company's taxable income. Effective January 1, 1996, the Company terminated its S Corporation status and in connection therewith, the Company recorded $48,110 in deferred tax liabilities as of January 1, 1996, through a charge to the statement of income. In addition, the Company made a distribution to existing shareholders of federal income taxes due on 1995 S Corporation income estimated to be $178,871 and issued $268,307 of notes payable to existing shareholders for S Corporation earnings not previously declared as dividends during 1995. For the three months ended March 31, 1996, the provision for income taxes is as follows: Current: Federal....................................................... $ 18,000 State......................................................... 3,000 -------- 21,000 Deferred: Federal....................................................... 124,000 State......................................................... 21,110 -------- 145,110 -------- $166,110 -------- -------- F-9 THE PUBLISHING COMPANY OF NORTH AMERICA, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) (INFORMATION AS OF MARCH 31, 1995 AND 1996 AND FOR THE THREE MONTHS THEN ENDED IS UNAUDITED) 4. INCOME TAXES--(CONTINUED) A reconciliation of statutory federal income taxes to reported income taxes for the three months ended March 31, 1996 is as follows: (in thousands) -------------- Income taxes computed at the federal statutory rate of 34%.... $107 State income taxes, net of federal benefit.................... 11 Deferred liability from termination of S Corporation status... 48 ----- $166 ----- ----- Deferred tax liabilities are composed of the following at March 31, 1996: (in thousands) -------------- Current deferred tax liability: Cash to accrual adjustment.................................. $126 Noncurrent deferred tax liability: Tax depreciation over book.................................. 19 ----- $145 ----- ----- The unaudited pro forma tax provisions, presented as if the Company were a taxable entity for all periods presented and calculated in accordance with SFAS No. 109, are as follows:
YEAR ENDED THREE MONTHS ENDED DECEMBER 31 MARCH 31 ------------------- -------------------- 1994 1995 1995 1996 ------- -------- -------- -------- Current income tax provision....................... $16,550 $166,000 $ 65,350 $ 21,000 Deferred income tax provision (benefit)............ (4,700) 52,700 (84,830) 97,000 ------- -------- -------- -------- $11,850 $218,700 $(19,480) $118,000 ------- -------- -------- -------- ------- -------- -------- --------
A reconciliation of statutory federal income taxes to reported income taxes is as follows: THREE MONTHS YEAR ENDED ENDED DECEMBER 31 MARCH 31 ------------ ------------ 1994 1995 1995 1996 ---- ---- ---- ---- (In thousands) Income taxes computed at the federal statutory rate of 34%..................................... $(19) $197 $(18) $107 State income taxes, net of federal benefit...... (2) 21 (2) 11 Loss on uncollectible note...................... 34 -- -- -- Other........................................... (1) 1 1 -- ---- ---- ---- ---- Total income tax provision...................... $ 12 $219 $(19) $118 ---- ---- ---- ---- ---- ---- ---- ---- F-10 THE PUBLISHING COMPANY OF NORTH AMERICA, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) (INFORMATION AS OF MARCH 31, 1995 AND 1996 AND FOR THE THREE MONTHS THEN ENDED IS UNAUDITED) 5. LEASE OBLIGATIONS The Company is obligated for the rental of its office locations, under noncancellable operating leases. The leases expire in December 1996 and may be renewed by the Company for an additional period of three years. Approximate future minimum lease payments due in 1996 are $45,000. For the years ended December 31, 1995 and 1994, total rental expenses included in other operating costs were $66,700 and $24,600, respectively. Total rental expenses for the three months ended March 31, 1996 and 1995 were $11,670 and $14,314, respectively. 6. UNCOLLECTIBLE NOTE RECEIVABLE In connection with the 1993 sale of a publishing business for $275,000, the Company's principal shareholder held a note receivable in the amount of $175,000 at January 1, 1994. This amount was reduced by approximately $75,000 during 1994 through the acquisition discussed in Note 7 and cash collections directly from customers (retained by the shareholder). Default on the loan in 1994 made it probable that all amounts due would not be collected according to the contractual terms of the agreement. The remaining balance of the note receivable was written off against income in 1994. 7. ACQUISITION In May 1994 the Company acquired, in a non-cash transaction, certain assets and liabilities related to the publication of bar association directories from Catalog Publishing Group, Inc. Accounts receivable and directories in progress of approximately $103,000 and $20,000, respectively, were received in exchange for the assumption of approximately $94,000 in liabilities and effective repayment of $29,000 of the note receivable discussed in Note 6. The acquisition was accounted for using the purchase method. Accordingly, the purchase price was allocated to assets acquired based on their estimated fair values. Results of Catalog Publishing Group, Inc.'s bar association directory operations have been included in the results of operations since the date of acquisition. 8. RELATED PARTY TRANSACTIONS At December 31, 1994 the principal shareholder of the Company had advanced the Company $13,610 to fund operations. This amount was repaid in 1995. 9. SUBSEQUENT EVENTS On March 6, 1996, the Company's shareholders authorized to amend and restate its Articles of Incorporation affecting shareholders' equity, including (i) increasing the number of authorized shares of common stock to 15,000,000; (ii) changing the par value from $1 per share to no par value; and (iii) effecting a 29,250-to-1 stock split on outstanding shares. All share and per share information in the accompanying financial statements has been restated to reflect the effect of the change in authorized shares and split. In March 1996, the Company's Board of Directors authorized management to file a registration statement with the Securities and Exchange Commission to permit the Company to sell shares of its common stock in an initial public offering. In March 1996, the Company borrowed $300,000 through the private placement of units consisting of an aggregate $300,000 principal amount of Bridge Notes and an aggregate of 30,000 shares of F-11 THE PUBLISHING COMPANY OF NORTH AMERICA, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) (INFORMATION AS OF MARCH 31, 1995 AND 1996 AND FOR THE THREE MONTHS THEN ENDED IS UNAUDITED) 9. SUBSEQUENT EVENTS--(CONTINUED) common stock. The amount of the Bridge Notes has been reduced and shareholders' equity increased by $77,778, representing the original issue discount based on an estimated fair value of $3.50 per share of common stock. The Bridge Notes bear interest at a rate of 8% per annum and are due on the earlier of the closing of the Company's anticipated initial public offering or one year from the date of issuance. The imputed interest rate on the Bridge Notes is 216.8% after giving recognition to original issue discount. The discount is being amortized using the interest method. In March 1996, the Company's Board of Directors approved a new stock plan with 500,000 shares of common stock available for stock options. These shares have been reserved for future issuance. F-12 REPORT OF INDEPENDENT AUDITORS To the Board of Directors The Publishing Company of North America, Inc. We have audited the accompanying schedule of direct revenues and direct operating expenses of Catalog Publishing Group, Inc.'s bar association directory operations for the period January 1, 1994 through May 9, 1994. This schedule is the responsibility of Catalog Publishing Group, Inc.'s management. Our responsibility is to express an opinion on this schedule based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the schedule of direct revenues and direct operating expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the schedule of direct revenues and direct operating expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall schedule presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the schedule referred to above presents fairly, in all material respects, the direct revenues and direct operating expenses of Catalog Publishing Group, Inc.'s bar association directory operations. ERNST & YOUNG LLP Orlando, Florida January 31, 1996 F-13 CATALOG PUBLISHING GROUP, INC. SCHEDULE OF DIRECT REVENUES AND DIRECT OPERATING EXPENSES PERIOD JANUARY 1, 1994 THROUGH MAY 9, 1994 Direct revenues........................................... $175,056 Direct operating expenses: Commissions............................................. 65,667 Salaries................................................ 11,814 Telephone............................................... 9,628 Printing and binding.................................... 17,875 -------- Total direct operating expenses........................... 104,984 -------- Direct revenues over direct operating expenses............ $ 70,072 -------- -------- See notes to schedule. F-14 CATALOG PUBLISHING GROUP, INC. NOTES TO SCHEDULE OF DIRECT REVENUES AND DIRECT OPERATING EXPENSES PERIOD JANUARY 1, 1994 THROUGH MAY 9, 1994 1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES BACKGROUND AND NATURE OF BUSINESS In 1993, Catalog Publishing Group, Inc. (the Company) purchased a business from The Publishing Company of North America, Inc.'s president engaged primarily in the publication of bar association directories. The schedule of direct revenues and direct operating expenses includes the direct revenues and direct operating expenses related to the publication of these directories conducted by the Company. REVENUE RECOGNITION Revenues and related costs are recorded upon publication of directories. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the schedule of direct revenues and direct operating expenses. Actual results could differ from those estimates. OMISSION OF OTHER EXPENSES The schedule of direct revenues and direct operating expenses does not give consideration to other expenses related to the publication of bar association directories such as rent, utilities, allocation of corporate overhead, etc. as this information is not known or reasonably available. F-15 [INTERNET HOME PAGE] [LOGO] THE PUBLISHING COMPANY [NEWSPAPER ARTICLE] OF NORTH AMERICA, INC. 1-800-644-3458 A CUSTOMER SERVICE ORGANIZATION DEDICATED TO MEETING THE COMMUNICATION NEEDS OF ASSOCIATIONS NATIONWIDE THROUGH PRINT AND ELECTRONIC MEDIA. ================================================================================ NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE [LOGO] COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN THE PUBLISHING COMPANY OFFER TO SELL OR A SOLICITATION OF AN OF NORTH AMERICA, INC. OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION IN THIS PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS. ------------------- 1,000,000 SHARES OF COMMON STOCK TABLE OF CONTENTS PAGE ---- Prospectus Summary.................... 3 Risk Factors.......................... 7 Use of Proceeds....................... 12 Dilution.............................. 13 Capitalization........................ 15 Selected Financial Data............... 16 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 18 Business.............................. 21 Management............................ 31 Principal Shareholders................ 35 Certain Transactions.................. 36 Concurrent Offering................... 36 ---------------- Subchapter S Distributions............ 36 PROSPECTUS Description of Securities............. 37 ---------------- Shares Eligible for Future Sale....... 39 Underwriting.......................... 41 Legal Matters......................... 43 LAIDLAW EQUITIES, INC. Experts............................... 43 Additional Information................ 43 Index to Financial Statements......... F-1 , 1996 UNTIL , 1996, (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. ================================================================================ [ALTERNATE PAGE] SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED MAY , 1996 Prospectus 12,500 Shares of Common Stock THE PUBLISHING COMPANY OF NORTH AMERICA, INC. This Prospectus relates to 12,500 shares of common stock, no par value (the "Common Stock") of The Publishing Company of North America, Inc., a Florida corporation (the "Company"), held by five holders (the "Selling Shareholders"). The Selling Shareholders' Common Stock was issued to the Selling Shareholders in a private placement by the Company in March 1996 (the "Private Placement"). See "Selling Shareholders" and "Plan of Distribution." The Common Stock offered by the Selling Shareholders pursuant to this Prospectus may be sold from time to time by the Selling Shareholders or by their transferees. The distribution of the Common Stock offered hereby by the Selling Shareholders may be effected in one or more transactions that may take place on the over-the-counter market, including ordinary brokers' transactions, privately negotiated transactions or through sales to one or more dealers for resale of such securities as principals, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the Selling Shareholders. The Selling Shareholders, and intermediaries through whom such securities are sold, may be deemed underwriters within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), with respect to the securities offered, and any profits realized or commissions received may be deemed underwriting compensation. The Company has agreed to indemnify the Selling Shareholders against certain liabilities, including liabilities under the Securities Act. The Company will not receive any of the proceeds from the sale of Common Stock by the Selling Shareholders. See "Selling Shareholders" and "Plan of Distribution." On the date of this Prospectus, a registration statement under the Securities Act with respect to an underwritten public offering by the Company of 1,000,000 shares of Common Stock was declared effective by the Securities and Exchange Commission. The Company will receive approximately $[ ] in net proceeds from such offering (assuming no exercise of the Underwriter's over-allotment option) after payment of underwriting discounts and commissions and estimated expenses of such offering. ------------------- THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS" CONTAINED AT PAGES 7-11 OF THIS PROSPECTUS. ------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESEN- TATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------- The date of this Prospectus is , 1996 A-1 THE OFFERING Common Stock Offered......................... 12,500 shares. See "Selling Shareholders." Common Stock Outstanding:.................... 3,961,000 shares(1),(2) Risk Factors................................. The Common Stock offered hereby involves a high degree of risk. See "Risk Factors." National Market System Symbol for Common Stock........................................ PCNA
- ------------ (1) An aggregate of 2,932,500 shares of Common Stock owned by the Company's executive officers, directors, proposed directors and certain shareholders (including 17,500 shares acquired in the Private Placement) and 12,500 shares being offered hereby owned by persons participating in the Private Placement are subject to lock-up agreements with the Underwriter and may not be sold publicly without the consent of the Underwriter until , 1997 (13 months from the date of this Prospectus) and , 1996 (90 days from the date of this Prospectus), respectively. See "Principal Shareholders" and "Selling Shareholders." (2) Does not include (i) 95,000 shares of Common Stock reserved for issuance in the event of the exercise of the Representative's Warrants issued in connection with the Company's initial public offering (ii) 500,000 shares of Common Stock reserved for issuance under the Company's 1996 Stock Plan (the "Plan") of which unvested 108,500 options exercisable at $ per share (the initial public offering price) have been granted. See "Management--1996 Stock Plan." A-2 [ALTERNATE PAGE] CONCURRENT PUBLIC OFFERING On the date of this Prospectus, a Registration Statement was declared effective under the Securities Act with respect to an underwritten offering by the Company of 1,000,000 shares of Common Stock by the Company and up to 150,000 additional shares of Common stock to cover over-allotments, if any. A-3 [ALTERNATE PAGE] SELLING SHAREHOLDERS An aggregate of up to 12,500 shares of Selling Shareholders' Common Stock may be offered for resale by the investors listed below. The following table sets forth certain information with respect to each Selling Shareholder for whom the Company has registered Selling Shareholders' Common Stock for resale to the public. The Company will not receive any of the proceeds from the sale of such Common Stock. There are no material relationships between any of the Selling Shareholders and the Company or any of its predecessors or affiliates, nor have any such material relationships existed within the past three years except as footnoted below. Except as described below, no Selling Shareholder will beneficially own any Common Stock of the Company if the Selling Shareholders' Common Stock is sold.
NUMBER OF SHARES OF NUMBER OF SHARES NUMBER OF SHARES OF COMMON STOCK OWNED OF COMMON STOCK COMMON STOCK OWNER SELLING SHAREHOLDER PRIOR TO OFFERING TO BE SOLD AFTER OFFERING - ---------------------------------------- ------------------- ---------------- ------------------- Harris, Michael D. and Beth J.(1)....... 7,500 2,500 5,000 Plakon, Ron(2).......................... 15,000 2,500 12,500 Plakon, Robert(3)....................... 15,000 2,500 12,500 Stein, Gerald........................... 2,500 2,500 -0- Strang, Steve(4)........................ 2,500(5) 2,500 -0-(5)
- ------------ (1) Attorneys employed by counsel to the Company in its initial public offering and this offering. (2) Father of D. Scott Plakon, the Company's Executive Vice President. (3) Brother of D. Scott Plakon, the Company's Executive Vice President. (4) Member of the Company's Advisory Board. (5) Does not include 4,000 shares underlying unvested options. A-4 [ALTERNATE PAGE] PLAN OF DISTRIBUTION The sale of the Common Stock by the Selling Shareholders may be effected from time to time in transactions (which may include block transactions by or for the account of the Selling Shareholders) in the over-the-counter market or in negotiated transactions, through the writing of options on the securities, a combination or such methods of sale or otherwise. Sales may be made at fixed prices which may be changed, at market prices prevailing at the time of sale, or at negotiated prices. The Selling Shareholders may effect such transactions by selling their Common Stock directly to purchasers, through broker-dealers acting as agents for the Selling Shareholders or to broker-dealers who may purchase Common Stock as principals and thereafter sell the Common Stock from time to time in the over-the-counter market in negotiated transactions or otherwise. Such broker-dealers, if any, may receive compensation in the form of discounts, concessions or commissions from the Selling Shareholders or the purchasers for whom such broker-dealers may act as agents or to whom they may sell as principals or otherwise (which compensation as to a particular broker-dealer may exceed customary commissions). Each Selling Shareholder has agreed not to sell, transfer, or otherwise dispose publicly the Selling Shareholders' Common Stock for a period of 90 days after the date of this Prospectus. Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the Selling Shareholders' Common Stock may not simultaneously engage in market making activities with respect to any securities of the Company for a period of at least two (and possibly nine) business days prior to the commencement of such distribution. Accordingly, in the event that Laidlaw Equities, Inc., the Underwriter of the Company's initial public offering, is engaged in a distribution of the Selling Shareholders' Common Stock it will not be able to make a market in the Company's Common Stock during the applicable restrictive period. However, the Underwriter has not agreed to nor is it obliged to act as broker-dealer in the sale of the Selling Shareholders' Common Stock. The Selling Shareholders may be required, and in the event the Underwriter is a market maker, will likely be required to sell such Common Stock through another broker-dealer. In addition, each Selling Shareholder desiring to sell Common Stock will be subject to the applicable provisions of the Exchange Act and the rules and regulations thereunder, including without limitation, Rules 10b-6 and 10b-7, which provisions may limit the timing of the purchases and sales of the Company's Common Stock by such Selling Shareholders. The Selling Shareholders and broker-dealers, if any, acting in connection with such sale might be deemed to be underwriters within the meaning of Section 2(11) of the Securities Act and any commission received by them and any profit on the resale of the securities might be deemed to be underwriting discounts and commissions under the Securities Act. A-5 [ALTERNATE PAGE] ================================================================================ NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF [LOGO] GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE THE PUBLISHING COMPANY COMPANY OR THE UNDERWRITER. THIS OF NORTH AMERICA, INC. PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION IN THIS PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS. 12,500 SHARES OF COMMON STOCK ------------------- TABLE OF CONTENTS PAGE ---- Prospectus Summary.................... Risk Factors.......................... Capitalization........................ Selected Financial Data............... Management's Discussion and Analysis of Financial Condition and Results of Operations....................... Business.............................. Management............................ Principal Shareholders................ ---------------- Certain Transactions.................. PROSPECTUS Concurrent Public Offering............ ---------------- Subchapter S Distributions............ Description of Securities............. Shares Eligible for Future Sale....... Selling Shareholders.................. Plan of Distribution.................. Legal Matters......................... Experts............................... Additional Information................ Index to Financial Statements......... F-1 UNTIL , 1996, (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A , 1996 PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. ================================================================================ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Company's articles of incorporation provide that the Company shall indemnify its officers and directors, employees and agents and former officers, directors, employees and agents against expenses (including attorney's fees), judgments, fines and amounts paid in settlement arising out of his or her services on behalf of the Company subject to the qualifications contained in Florida law as it now exists. The Company has entered into Indemnification Agreements with its officers and directors providing for indemnification to the fullest extent under Florida law and containing an advancement of expenses provision. Florida law generally provides that a corporation shall have such power to indemnify such persons to the extent they acted in good faith in a manner reasonably believed to be in, or not opposed to, the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful. In the event any such person shall be judged liable for negligence or misconduct, such indemnification shall apply only if approved by the court in which the action was pending. Any other indemnification shall be made only after the determination by the Board of Directors (excluding any directors who were party to such action), by independent legal counsel in a written opinion, or by a majority vote of shareholders (excluding any shareholders who were parties to such action). INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE. ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The expenses in connection with the issuance and distribution of the securities being registered hereby (except for the Underwriting discounts and commissions) will be borne by the Company and are estimated to be as follows: Registration Fee.............................................. $ 2,653.48 NMS Listing Fee............................................... 6,980.50 NASD Filing Fee............................................... 1,190.00 Transfer Agent Fee............................................ 1,500.00 Printing Costs................................................ 50,000.00 Legal Fees and Expenses....................................... 100,000.00 Accounting Fees and Expenses.................................. 85,000.00 Blue Sky Fees and Expenses.................................... 30,000.00 Underwriters' Non-Accountable Expense Allowance............... 165,000.00* Miscellaneous................................................. 32,676.02 ----------- Total................................................... $475,000.00 ----------- ----------- - ------------ * Assuming an offering price of $5.50 per share. II-1 ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES. During the past three years, the following persons and entities acquired shares of Common Stock and other securities from the Company as set forth in the table below:
AMOUNT OF CLASS OF SECURITIES SHAREHOLDER DATE SECURITIES SOLD CONSIDERATION - ----------------------------------------- ------- ------------- ---------- ------------- Peter S. Balise.......................... 9/21/93 Common Stock 2,925,000 $ 100 Peter S. Balise.......................... 3/8/96 Bridge Note $ 50,000 $50,000 Common Stock 5,000 Matt Butler.............................. 3/8/96 Bridge Note $ 50,000 $50,000 Common Stock 5,000 Michael D. and Beth J. Harris............ 3/8/96 Bridge Note $ 25,000 $25,000 Common Stock 2,500 James M. Koller.......................... 3/8/96 Bridge Note $ 25,000 $25,000 Common Stock 2,500 John D. McKey, Jr........................ 3/8/96 Bridge Note $ 50,000 $50,000 Common Stock 5,000 Robert Plakon............................ 3/8/96 Bridge Note $ 25,000 $25,000 Common Stock 2,500 Ron Plakon............................... 3/8/96 Bridge Note $ 25,000 $25,000 Common Stock 2,500 Steve Strang............................. 3/8/96 Bridge Note $ 25,000 $25,000 Common Stock 2,500 Gerald Stein............................. 3/8/96 Bridge Note $ 25,000 $25,000 Common Stock 2,500
The Common Stock and Bridge Notes listed above were sold to accredited investors in reliance upon exemptions from registration pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 thereunder. ITEM 27. EXHIBITS. 1.1 --Form of Underwriting Agreement* 1.2 --Form of Selected Dealer's Agreement* 3.1 --Amended and Restated Articles of Incorporation* 3.2 --Form of First Amendment to Amended and Restated Articles of Incorporation* 3.3 --Amended and Restated Bylaws* 4.1 --Form of Common Stock Certificate** 4.2 --Form of Note* 4.3 --Form of Representative's Warrant Agreement* 5. --Opinion of Cohen, Chernay, Norris, Weinberger & Harris** 10.1 --Form of Employment Agreement of Peter S. Balise** 10.2 --Form of Employment Agreement with D. Scott Plakon** 10.3 --1996 Stock Plan** 10.4 --Form of Agreement to Publish* 23.1 --Consent of Ernst & Young LLP 23.2 --Consent of Cohen, Chernay, Norris, Weinberger & Harris** 99.1 --Consent of Matt Butler* 99.2 --Consent of John D. McKey, Jr., Esq.* - ------------ * Contained in Registration Statement on Form SB-2 filed on March 11, 1996. ** Contained in Amendment No. 2 to Form SB-2 filed on April 18, 1996. *** Contained in Opinion of Cohen, Chernay, Norris, Weinberger & Harris. II-2 ITEM 28. UNDERTAKINGS. (a) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions or otherwise, the Company has been advised that, in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (b) The Company hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to: (i) Include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and (iii) Include any additional or changed material information on the plan of distribution. (2) For determining liability under the Securities Act, treat each such post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) For purposes of determining any liability under the Securities Act, the information omitted from the form of Prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in the form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the registration statement as of the time it was declared effective. (5) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of Prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (6) To deliver to the Underwriters at the closing certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. II-3 SIGNATURES In accordance with the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form SB-2 and has authorized this Amendment No. 3 to Registration Statement to be signed on its behalf by the undersigned, in the City of Deltona, State of Florida, on the 16 day of May 1996. THE PUBLISHING COMPANY OF NORTH AMERICA, INC. By: /s/ PETER S. BALISE .................................. Peter S. Balise President (Chief Executive Officer) In accordance with the requirements of the Securities Act of 1933, this Amendment No. 3 to Registration Statement on Form SB-2 was signed by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE - ------------------------------------- ------------------------------------- ------------------ /s/ PETER S. BALISE Chairman of the Board of Directors May 16, 1996 ..................................... (Peter S. Balise) /s/ D. SCOTT PLAKON Director May 16, 1996 ..................................... (D. Scott Plakon) /s/ JAMES M. KOLLER Chief Financial Officer May 16, 1996 ..................................... (Principal Financial Officer (James M. Koller) and Chief Accounting Officer)
II-4 EXHIBIT INDEX 1.1 -- Form of Underwriting Agreement* 1.2 -- Form of Selected Dealer's Agreement* 3.1 -- Amended and Restated Articles of Incorporation* 3.2 -- Form of First Amendment to Amended and Restated Articles of Incorporation* 3.3 -- Amended and Restated Bylaws* 4.1 -- Form of Common Stock Certificate** 4.2 -- Form of Note* 4.3 -- Form of Representative's Warrant Agreement* 5. -- Opinion of Cohen, Chernay, Norris, Weinberger & Harris** 10.1 -- Form of Employment Agreement of Peter S. Balise** 10.2 -- Form of Employment Agreement with D. Scott Plakon** 10.3 -- 1996 Stock Plan** 10.4 -- Form of Agreement to Publish* 23.1 -- Consent of Ernst & Young LLP 23.2 -- Consent of Cohen, Chernay, Norris, Weinberger & Harris** 99.1 -- Consent of Matt Butler* 99.2 -- Consent of John D. McKey, Jr., Esq.* - ------------ * Contained in Registration Statement on Form SB-2 filed on March 11, 1996. ** Contained in Amendment No. 2 to Form SB-2 filed on April 18, 1996. *** Contained in Opinion of Cohen, Chernay, Norris, Weinberger & Harris. EX-23.1 2 Exhibit 23.1 Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" and to the use of our reports dated January 12, 1996, except for Note 9, as to which the date is March 8, 1996, with respect to the financial statements of The Publising Company of North America, Inc., and January 31, 1996, with respect to the financial statements of Catalog Publishing Group, Inc., in Amendment No. 3 to the Registration Statement (Form SB-2 No. 333-2306) and related Prospectus of The Publishing Company of North America, Inc. for the registration of 1,000,000 shares of its common stock. /s/ Ernst & Young LLP Orlando, Florida May 15, 1996 -----END PRIVACY-ENHANCED MESSAGE-----