LIVE VENTURES Inc - Quarter Report: 2005 June (Form 10-Q)
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
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(Mark
One)
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x
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Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934
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||
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For
the quarterly period ended June 30, 2005
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o
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Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act
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||
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For
the transition period from _____________ to
_______________
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Commission
File Number 0-24217
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YP
CORP.
(Exact
Name of Registrant as Specified in Its Charter)
|
Nevada
|
85-0206668
|
|
(State
or Other Jurisdiction of
Incorporation or Organization)
|
(IRS
Employer Identification No.)
|
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4840
East Jasmine St. Suite 105
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85205
|
|
Mesa,
Arizona
|
(Zip
Code)
|
|
(Address
of Principal Executive Offices)
|
(480)
654-9646
(Registrant’s
Telephone Number, Including Area Code)
Indicate
by check mark whether the registrant: (1) has filed all reports required
to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. Yes þ
No
o
Indicate
by check mark whether the registrant is an accelerated filer (as defined
in Rule
12b-2 of the Exchange Act). Yes o
No
þ
APPLICABLE
ONLY TO CORPORATE ISSUERS
The
number of shares of the issuer’s common equity outstanding as of August 1, 2005
was 49,219,736 shares of common stock, par value $.001.
INDEX
TO FORM 10-Q FILING
FOR
THE QUARTER ENDED JUNE 30, 2005
TABLE
OF CONTENTS
PART
I.
FINANCIAL
INFORMATION
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Page
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3
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4
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5
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6
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15
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28
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28
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PART
II
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OTHER
INFORMATION
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29
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29
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30
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PART
I - FINANCIAL
INFORMATION
|
ITEM
1.
|
FINANCIAL
STATEMENTS
|
YP
CORP. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
June
30,
|
September
30,
|
||||||
|
2005
|
2004
|
||||||
|
(unaudited)
|
|||||||
|
Assets
|
|||||||
|
Cash
and equivalents
|
$
|
9,004,290
|
$
|
3,576,529
|
|||
|
Restricted
cash
|
365,000
|
-
|
|||||
|
Accounts
receivable, net of allowance for doubtful accounts of $963,654
and
$3,400,575
|
6,217,833
|
8,362,283
|
|||||
|
Prepaid
expenses and other current assets
|
1,187,910
|
822,919
|
|||||
|
Income
tax refund receivable
|
-
|
1,239,436
|
|||||
|
Deferred
tax asset
|
148,362
|
352,379
|
|||||
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Total
current assets
|
16,923,395
|
14,353,546
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|||||
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Accounts
receivable, long term portion, net of allowance for doubtful accounts
of
$85,522 and $269,662
|
1,317,970
|
2,075,334
|
|||||
|
Customer
acquisition costs, net of accumulated amortization of $3,821,547
and
$5,096,669
|
3,022,645
|
4,482,173
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|||||
|
Property
and equipment, net
|
485,865
|
725,936
|
|||||
|
Deposits
and other assets
|
60,919
|
239,060
|
|||||
|
Intangible
assets, net of accumulated amortization of $3,139,328 and
$2,446,403
|
4,981,102
|
3,326,274
|
|||||
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Advances
to affiliates
|
-
|
3,894,862
|
|||||
|
Total
assets
|
$
|
26,791,896
|
$
|
29,097,185
|
|||
|
Liabilities
and Stockholders' Equity
|
|||||||
|
Accounts
payable
|
$
|
501,539
|
$
|
1,210,364
|
|||
|
Accrued
liabilities
|
767,644
|
542,481
|
|||||
|
Income
taxes payable
|
505,458
|
-
|
|||||
|
Notes
payable- current portion
|
-
|
115,868
|
|||||
|
Total
current liabilities
|
1,774,641
|
1,868,713
|
|||||
|
Deferred
income taxes
|
183,099
|
1,116,314
|
|||||
|
Total
liabilities
|
1,957,740
|
2,985,027
|
|||||
|
Commitments
and contingencies
|
-
|
-
|
|||||
|
Series
E convertible preferred stock, $.001 par value, 200,000 shares
authorized,
127,840 and 128,340 issued and outstanding, liquidation preference
$38,202
|
10,866
|
10,909
|
|||||
|
Common
stock, $.001 par value, 100,000,000 shares authorized,48,964,728
and
50,071,302 issued and outstanding
|
48,965
|
50,071
|
|||||
|
Paid
in capital
|
10,577,670
|
11,375,384
|
|||||
|
Treasury
stock
|
(1,606,131
|
)
|
-
|
||||
|
Deferred
stock compensation
|
(3,872,075
|
)
|
(5,742,814
|
)
|
|||
|
Retained
earnings
|
19,674,861
|
20,418,608
|
|||||
|
Total
stockholders' equity
|
24,834,156
|
26,112,158
|
|||||
|
Total
liabilities and stockholders' equity
|
$
|
26,791,896
|
$
|
29,097,185
|
|||
See
accompanying notes to consolidated financial statements.
YP
CORP. AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
Three
Months Ended June 30,
|
Nine
Months Ended June 30,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Net
revenues
|
$
|
6,517,158
|
$
|
16,890,361
|
$
|
19,151,922
|
$
|
47,098,181
|
|||||
|
Cost
of services
|
925,805
|
8,195,264
|
2,921,322
|
19,678,248
|
|||||||||
|
Gross
profit
|
5,591,353
|
8,695,097
|
16,230,600
|
27,419,933
|
|||||||||
|
Operating
expenses:
|
|||||||||||||
|
General
and administrative expenses
|
3,320,434
|
3,271,624
|
9,886,929
|
9,142,889
|
|||||||||
|
Sales
and marketing expenses
|
1,565,536
|
1,667,040
|
4,896,063
|
4,403,385
|
|||||||||
|
Depreciation
and amortization
|
383,503
|
243,261
|
977,382
|
639,173
|
|||||||||
|
Total
operating expenses
|
5,269,473
|
5,181,925
|
15,760,374
|
14,185,447
|
|||||||||
|
Operating
income
|
321,880
|
3,513,172
|
470,226
|
13,234,486
|
|||||||||
|
Other
income (expense):
|
|||||||||||||
|
Interest
expense and other financing costs
|
-
|
(5,643
|
)
|
(8,610
|
)
|
(13,310
|
)
|
||||||
|
Interest
income
|
29,859
|
104,540
|
206,621
|
261,905
|
|||||||||
|
Other
income (expense)
|
(584,988
|
)
|
436,464
|
(477,535
|
)
|
782,617
|
|||||||
|
Total
other income (expense)
|
(555,129
|
)
|
535,361
|
(279,524
|
)
|
1,031,212
|
|||||||
|
Income
before income taxes and cumulative effect of accounting
change
|
(233,249
|
)
|
4,048,533
|
190,702
|
14,265,698
|
||||||||
|
Income
tax benefit (provision)
|
83,465
|
(1,409,113
|
)
|
(92,982
|
)
|
(4,992,994
|
)
|
||||||
|
|
|||||||||||||
|
Income
before cumulative effect of accounting change
|
(149,784
|
)
|
2,639,420
|
97,720
|
9,272,704
|
||||||||
|
|
-
|
-
|
|||||||||||
|
Cumulative
effect of accounting change (net of income taxes of $53,764 in
2005)
|
-
|
-
|
99,848
|
-
|
|||||||||
|
Net
income (loss)
|
$
|
(149,784
|
)
|
$
|
2,639,420
|
$
|
197,568
|
$
|
9,272,704
|
||||
|
Net
income (loss) per common share:
|
|||||||||||||
|
Basic:
|
|||||||||||||
|
Income
(loss) applicable to common stock before cumulative effect of accounting
change
|
$
|
(0.00
|
)
|
$
|
0.06
|
$
|
0.00
|
$
|
0.20
|
||||
|
Cumulative
effect of accounting change
|
$
|
-
|
$
|
-
|
$
|
0.00
|
$
|
-
|
|||||
|
Net
income (loss) applicable to common stock
|
$
|
(0.00
|
)
|
$
|
0.06
|
$
|
0.00
|
$
|
0.20
|
||||
|
Diluted:
|
|||||||||||||
|
Income
(loss) applicable to common stock before cumulative effect of accounting
change
|
$
|
(0.00
|
)
|
$
|
0.05
|
$
|
0.00
|
$
|
0.19
|
||||
|
Cumulative
effect of accounting change
|
$
|
-
|
$
|
-
|
$
|
0.00
|
$
|
-
|
|||||
|
Net
income (loss) applicable to common stock
|
$
|
(0.00
|
)
|
$
|
0.05
|
$
|
0.00
|
$
|
0.19
|
||||
|
Weighted
average common shares outstanding:
|
|||||||||||||
|
Basic
|
44,860,228
|
47,294,551
|
46,060,709
|
47,033,977
|
|||||||||
|
Diluted
|
44,860,228
|
48,096,618
|
46,296,626
|
47,805,915
|
|||||||||
See
accompanying notes to consolidated financial statements.
YP
CORP. AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Nine
Months Ended June 30,
|
|||||||
|
2005
|
2004
|
||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
|
Net
income
|
$
|
197,568
|
$
|
9,272,704
|
|||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
|
Depreciation
and amortization
|
977,381
|
639,171
|
|||||
|
Amortization
of deferred stock compensation
|
1,105,763
|
622,901
|
|||||
|
Issuance
of common stock as compensation for services
|
119,500
|
-
|
|||||
|
Non-cash
gain on transaction with affiliates
|
171,865
|
-
|
|||||
|
Cumulative
effect of accounting change
|
(99,848
|
)
|
-
|
||||
|
Deferred
income taxes
|
(782,962
|
)
|
172,897
|
||||
|
Loss
on disposal of equipment
|
-
|
36,932
|
|||||
|
Provision
for uncollectible accounts
|
(54,492
|
)
|
-
|
||||
|
Changes
in assets and liabilities:
|
|||||||
|
Accounts
receivable
|
2,956,306
|
(6,896,403
|
)
|
||||
|
Customer
acquisition costs
|
1,459,528
|
(963,668
|
)
|
||||
|
Prepaid
and other current assets
|
(207,201
|
)
|
(477,007
|
)
|
|||
|
Restricted
cash
|
(365,000
|
)
|
-
|
||||
|
Deposits
and other assets
|
178,141
|
34,900
|
|||||
|
Accounts
payable
|
(708,825
|
)
|
83,182
|
||||
|
Accrued
liabilities
|
225,163
|
(805,464
|
)
|
||||
|
Income
taxes payable
|
1,744,894
|
1,149,857
|
|||||
|
Advances
to affiliates (accrued interest)
|
(157,972
|
)
|
-
|
||||
|
Net
cash provided by operating activities
|
6,759,809
|
2,870,002
|
|||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
|
Advances
made to affiliates and related parties
|
-
|
(2,725,000
|
)
|
||||
|
Repayments
of advances made to affiliates and related parties
|
-
|
1,175,000
|
|||||
|
Expenditures
for intangible assets
|
(346,751
|
)
|
(299,425
|
)
|
|||
|
Purchases
of equipment
|
(44,387
|
)
|
(353,311
|
)
|
|||
|
Net
cash used for investing activities
|
(391,138
|
)
|
(2,202,736
|
)
|
|||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
|
Series
E preferred stock dividends
|
(780
|
)
|
-
|
||||
|
Common
stock dividends
|
(940,355
|
)
|
(499,983
|
)
|
|||
|
Proceeds
from conversion of preferred stock
|
225
|
-
|
|||||
|
Net
cash used for financing activities
|
(940,910
|
)
|
(499,983
|
)
|
|||
|
INCREASE
IN CASH AND CASH EQUIVALENTS
|
5,427,761
|
167,283
|
|||||
|
CASH
AND CASH EQUIVALENTS, beginning of period
|
3,576,529
|
2,378,848
|
|||||
|
CASH
AND CASH EQUIVALENTS, end of period
|
$
|
9,004,290
|
$
|
2,546,131
|
|||
See
accompanying notes to consolidated financial statements
|
1.
|
ORGANIZATION
AND BASIS OF
PRESENTATION
|
The
accompanying consolidated financial statements include the accounts of YP
Corp.,
a Nevada Corporation, and its wholly owned subsidiaries (collectively the
“Company”). The Company is an Internet-based provider of yellow page directories
and advertising space on or through www.YP.com, www.YP.net
and www.Yellow-Page.net. No material or information contained on these websites
is a part of the notes or the quarterly report to which notes are attached.
All
material intercompany accounts and transactions have been
eliminated.
The
accompanying unaudited financial statements as of June 30, 2005 and for the
three and nine months ended June 30, 2005 and 2004, respectively,
have been prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all of
the
information and footnotes required by generally accepted accounting principles
for audited financial statements. In the opinion of the Company’s management,
the interim information includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results for
the
interim periods. The footnote disclosures related to the interim financial
information included herein are also unaudited. Such financial information
should be read in conjunction with the consolidated financial statements
and
related notes thereto as of September 30, 2004 and for the year then ended
included in the Company’s annual report on Form 10-KSB for the year ended
September 30, 2004.
All
amounts, except share and per share amounts, are rounded to the nearest thousand
dollars.
The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses during
the
reporting period. Significant estimates and assumptions have been used by
management in conjunction with establishing
allowances for customer refunds, non-paying customers, dilution and fees,
analyzing the recoverability of the carrying amount of intangible assets,
estimating amortization periods for direct response advertising costs,
estimating forfeitures of restricted stock and evaluating the recoverability
of
deferred tax assets. Actual results could differ from these estimates. Certain
prior period amounts have been revised to conform to the current period
presentation. These changes had no impact on previously reported net income
or
stockholders’ equity.
|
2.
|
ACCOUNTING
CHANGES
|
Effective
October 1, 2004, the Company changed its method of accounting for forfeitures
of
restricted stock granted to employees, executives and consultants. Prior
to this
date, the Company recognized forfeitures as they occurred. Upon occurrence,
the
Company reversed the previously recognized expense associated with such grant.
Effective October 1, 2004, the Company changed to an expense recognition
method
that is based on an estimate of the number of shares for which the service
is
expected to be rendered. The Company believes that this is a preferable method
as it provides less volatility in expense recognition.
Additionally,
while both methods of accounting for forfeitures are acceptable under current
guidance, the implementation of FAS 123R
(effective during the Company’s first
quarter of fiscal 2006) will no longer permit companies to recognize forfeitures
as they occur.
See
Note 8. As this new guidance will require the Company to change its method
of
accounting for restricted stock forfeitures, the Company has decided to
adopt
such change as of the beginning of its fiscal year. The Company is not
adopting
the provisions of FAS 123R prior to its effective date. Rather, the Company
is
changing its accounting for forfeitures under the allowed options prescribed
in
FAS 123.
The
impact of this change for periods prior to October 1, 2004 was an increase
to
income of $100,000 (less than $0.01 per share), net of taxes of $54,000,
and has
been reflected as a cumulative effect of a change in accounting principle
in the
Company’s consolidated statement of operations for the nine months ended June
30, 2005. Because stock grants are now recorded net of estimated forfeitures,
the cumulative effect of this change also reduced Additional Paid in Capital
and
Deferred Compensation by $1,013,000 and $1,166,000, respectively, at October
1,
2004. The effect of the change was to decrease net income by $1,000 (net
of
income taxes of $1,000) for the three months ended June 30, 2005 and increase
net income by $72,000 (net of income taxes of $43,000) for the nine months
ended
June 30, 2005.
The
estimated pro forma effects of the accounting change on the Company’s results of
operations for the three and nine months ended June 30, 2004 are as
follows:
|
Three
Months
Ended
June
30,
2004
|
Nine
Months
Ended
June
30,
2004
|
||||||
|
As
reported:
|
|||||||
|
Net
income
|
$
|
2,639,000
|
$
|
9,273,000
|
|||
|
Basic
net income per share
|
$
|
0.06
|
$
|
0.20
|
|||
|
Diluted
net income per share
|
$
|
0.05
|
$
|
0.19
|
|||
|
Pro
forma amounts reflecting the accounting change applied
retroactively:
|
|||||||
|
Net
income
|
$
|
2,606,000
|
$
|
9,325,000
|
|||
|
Basic
net income per share
|
$
|
0.06
|
$
|
0.20
|
|||
|
Diluted
net income per share
|
$
|
0.05
|
$
|
0.20
|
|||
|
Weighted
average common shares outstanding:
|
|||||||
|
Basic
|
47,294,551
|
47,033,977
|
|||||
|
Diluted
|
48,096,618
|
47,805,915
|
|||||
|
3.
|
BALANCE
SHEET INFORMATION
|
Balance
sheet information is as follows:
|
June
30, 2005
|
||||||||||
|
Current
|
Long-Term
|
Total
|
||||||||
|
Gross
accounts receivable
|
$
|
7,182,000
|
$
|
1,404,000
|
$
|
8,586,000
|
||||
|
Allowance
for doubtful accounts
|
(964,000
|
)
|
(86,000
|
)
|
(1,050,000
|
)
|
||||
|
Net
|
$
|
6,218,000
|
$
|
1,318,000
|
$
|
7,536,000
|
||||
|
September
30, 2004
|
||||||||||
|
Current
|
Long-Term
|
Total
|
||||||||
|
Gross
accounts receivable
|
$
|
11,763,000
|
$
|
2,345,000
|
$
|
14,108,000
|
||||
|
Allowance
for doubtful accounts
|
(3,401,000
|
)
|
(270,000
|
)
|
(3,671,000
|
)
|
||||
|
Net
|
$
|
8,362,000
|
$
|
2,075,000
|
$
|
10,437,000
|
||||
| Components of allowance for doubtful accounts are as follows: | ||||||||||
|
June
30, 2005
|
September
30,
2004
|
||||||
|
Allowance
for dilution and fees on amounts due from billing
aggregators
|
$
|
765,000
|
$
|
2,978,000
|
|||
|
Allowance
for customer refunds
|
285,000
|
638,000
|
|||||
|
Other
allowances
|
-
|
55,000
|
|||||
|
$
|
1,050,000
|
$
|
3,671,000
|
||||
|
Property
and equipment consists of the following:
|
|||||||
|
June
30, 2005
|
September
30,
2004
|
||||||
|
Leasehold
improvements
|
$
|
439,000
|
$
|
439,000
|
|||
|
Furnishings
and fixtures
|
298,000
|
298,000
|
|||||
|
Office,
computer equipment and other
|
1,038,000
|
993,000
|
|||||
|
Total
|
1,775,000
|
1,730,000
|
|||||
|
Less
accumulated depreciation
|
(1,289,000
|
)
|
(1,004,000
|
)
|
|||
|
Property
and equipment, net
|
$
|
486,000
|
$
|
726,000
|
|||
|
4.
|
COMMITMENTS
AND CONTINGENCIES
|
At
June
30, 2005, future minimum annual lease payments under operating lease agreements
for fiscal years ended September 30 are as follows:
|
Remainder
of Fiscal 2005
|
$
|
74,000
|
||||
|
Fiscal
2006
|
|
336,000
|
||||
|
Fiscal
2007
|
29,000
|
|||||
|
Fiscal
2008
|
5,000
|
|||||
|
Thereafter
|
-
|
|||||
|
Total
|
$
|
444,000
|
Commitments
to Investment Banking Firm
On
October 8, 2004, pursuant to the terms of a Letter Agreement with Jefferies
& Company, Inc., the Company issued a total of 925,000 shares of common
stock to Jefferies. These shares were issued in lieu of cash fees for Jefferies’
investment banking services. These shares were not issued under the Company’s
2003 Stock Plan. Of the total shares issued to Jefferies, 100,000 shares
were
issued without restrictions on transfer other than those imposed by Rule
144
under the Securities Act of 1933, as amended. The remaining 825,000 shares
were
granted pursuant to a Restricted Stock Agreement. Accordingly, these shares
remain subject to restrictions on transfer and sale, which lapse in accordance
with a vesting schedule depending on the achievement of certain performance
goals, none of which were achieved as of June 30, 2005.
In
accordance with the provisions of EITF Topic D-90, Grantor
Balance Sheet Presentation of Unvested, Forfeitable Equity Instruments Granted
to a Nonemployee, because
the Company has a right to receive future services in exchange for unvested,
forfeitable equity instruments, the 825,000 shares are treated as unissued
for
accounting purposes until such time that the performance goals are achieved.
Commitments
to Stockholders
As
part
of the December 2003 agreement between the Company and two of its largest
stockholders, Morris & Miller, Ltd. and Mathew & Markson, Ltd., the
Company terminated all prior obligations to make advances to these stockholders.
Accrued interest on outstanding balances are reflected in the Advances to
Affiliates line item of the accompanying balance sheet.
As
part
of this agreement, the Company agreed to pay recurring quarterly dividends
of
not less than $0.01 per share to all of its common stockholders, subject
to
applicable law and certain restrictions with respect to the Company’s
liquidity.
The
quarterly dividend associated with the third
quarter of
fiscal
2005 was
declared and paid in July 2005 and, therefore, was not accounted for in the
three months ended June 30, 2005.
In
connection with the Transfer and Repayment Agreement described in Note 6,
as of
April 1,2005, the Company is no longer required to pay quarterly dividends.
Future dividend payments will be evaluated by the Board of Directors based
upon
earnings, capital requirements and financial position, general economic
conditions, alternative uses of capital and other pertinent
factors.
Termination
Agreements with Related Parties
Prior
to
fiscal 2004,
the
Company entered into Executive Consulting Agreements with four entities,
each of
which was controlled by one of the Company’s four executive officers at that
time and through which each entities’ support staff provided executive
management services to the Company. During
the fiscal year ended September 30, 2004, the Company terminated the Executive
Consulting Agreements with the entities controlled by its former CEO, former
Executive Vice President of Marketing, and former CFO. In the case of the
former
CEO, the Company agreed to pay Sunbelt Financial Concepts, Inc. $960,000
over
two years in lieu of the amounts due under the original contract, which called
for approximately $2.6 million in payments over three years. In the case
of the
former Executive Vice President of Marketing, the Company agreed to pay
Advertising Management & Consulting Services, Inc. $697,000 over two years
in lieu of the amounts due under the original contract, which called for
approximately $1.9 million in payments over three years. In the case of the
former CFO, the Company paid MAR & Associates, Inc. $120,000 over six months
in lieu of the amounts due under the original contract, which called for
approximately $750,000 in payments over three years. With respect to these
agreements, approximately $1,360,000 of the settlement payments described
above
has been allocated to non-compete agreements, as paid, based on values
determined by an independent third party valuation firm. The non-compete
agreements extend for six years. The balance of the payments were to be expensed
as incurred as two of the agreements called for ongoing services to be provided
over a two-year period. See
Note
6.
During
the three months ended December 31, 2004, the Company terminated the remaining
Executive Consulting Agreement with Advanced Internet Marketing, Inc.,
an entity
controlled by DeVal Johnson, a director and former Executive Vice President.
Under the terms of this termination agreement, the Company agreed to pay
$368,000 over an 18-month period of time. Approximately $281,000 of this
amount
has been allocated to non-compete agreements, as paid. See Note
6.
Subsequent
to June 30, 2005, the Company has terminated each of the termination agreements
and paid all remaining amounts owed thereunder. See Note 9.
Litigation
The
Company is party to certain legal proceedings incidental to the conduct of
its
business. Management believes that the outcome of pending legal proceedings
will
not, either individually or in the aggregate, have a material adverse effect
on
its business, financial position, results of operations, cash flows or
liquidity.
During
the third fiscal quarter of 2005, the Company received an arbitration judgment
involving disputed fees associated with a former public relations firm. Under
the terms of this judgment, the Company is obligated to pay $328,000, inclusive
of legal fees and associated expenses. The loss associated with this judgment
was accrued in the third fiscal quarter of 2005 and is reflected in other
income
and expense in the accompanying consolidated statement of operations. In
accordance with the terms of the judgment, the Company has established a
bond in
the amount of $365,000 which is reflected as restricted cash in the accompanying
balance sheet. The Company is currently appealing the arbitrator’s decision.
|
5.
|
NET
INCOME
(LOSS) PER SHARE
|
Net
income (loss)
per share is calculated using the weighted average number of shares of common
stock outstanding during the year. Preferred stock dividends are subtracted
from
net income to
determine the amount available to common stockholders.
The
following table
presents
the computation of basic and diluted income (loss) per share:
|
Three
Months Ended June 30,
|
Nine
Months Ended June 30,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
|
|
|
|
||||||||||
|
Income
(loss) before cumulative effect of accounting change
|
$
|
(150,000
|
)
|
$
|
2,639,000
|
$
|
98,000
|
$
|
9,273,000
|
||||
|
Less:
preferred stock dividends
|
-
|
-
|
(1,000
|
)
|
(1,000
|
)
|
|||||||
|
Income
(loss) applicable to common stock before cumulative effect of accounting
change
|
(150,000
|
)
|
2,639,000
|
97,000
|
9,272,000
|
||||||||
|
Cumulative
effect of accounting change
|
-
|
-
|
100,000
|
-
|
|||||||||
|
Net
income (loss) applicable to common stock
|
$
|
(150,000
|
)
|
$
|
2,639,000
|
$
|
197,000
|
$
|
9,272,000
|
||||
|
Basic
weighted average common shares outstanding
|
44,860,228
|
47,294,551
|
46,060,709
|
47,033,977
|
|||||||||
|
Add
incremental shares for:
|
|||||||||||||
|
Unvested
restricted stock
|
-
|
562,529
|
136,636
|
560,547
|
|||||||||
|
Series
E convertible preferred stock
|
-
|
111,240
|
75,565
|
108,689
|
|||||||||
|
Outstanding
warrants
|
-
|
127,698
|
23,716
|
102,701
|
|||||||||
|
Diluted
weighted average common shares outstanding
|
44,860,228
|
48,096,018
|
46,296,626
|
47,805,915
|
|||||||||
|
Net
income (loss) per share:
|
|||||||||||||
|
Basic:
|
|||||||||||||
|
Income
(loss) applicable to common stock before cumulative effect of accounting
change
|
$
|
(0.00
|
)
|
$
|
0.06
|
$
|
0.00
|
$
|
0.20
|
||||
|
Cumulative
effect of accounting change
|
$
|
0.00
|
$
|
0.00
|
$
|
0.00
|
$
|
0.00
|
|||||
|
Net
income (loss) applicable to common stock
|
$
|
(0.00
|
)
|
$
|
0.06
|
$
|
0.00
|
$
|
0.20
|
||||
|
Diluted:
|
|||||||||||||
|
Income
(loss) applicable to common stock before cumulative effect of accounting
change
|
$
|
(0.00
|
)
|
$
|
0.05
|
$
|
0.00
|
$
|
0.19
|
||||
|
Cumulative
effect of accounting change
|
$
|
0.00
|
$
|
0.00
|
$
|
0.00
|
$
|
0.00
|
|||||
|
Net
income (loss) applicable to common stock
|
$
|
(0.00
|
)
|
$
|
0.05
|
$
|
0.00
|
$
|
0.19
|
||||
The
following potentially dilutive securities were excluded from the calculation
of
net income per share because the effects are antidilutive:
|
Three
Months Ended June 30,
|
Nine
Months Ended June 30,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Warrants
to purchase shares of common stock
|
500,000
|
125,000
|
375,000
|
125,000
|
|||||||||
|
Series
E convertible preferred stock
|
127,840
|
-
|
-
|
-
|
|||||||||
|
Shares
of non-vested restricted stock
|
3,523,400
|
377,500
|
2,964,744
|
377,500
|
|||||||||
|
4,151,240
|
502,500
|
3,339,744
|
502,500
|
||||||||||
|
6.
|
RELATED
PARTY TRANSACTIONS
|
As
described in Note 4, the
former
CEO, CFO, Executive Vice President and Corporate Secretary provided
their
services and those of their respective staffs through separate entities
controlled by these individuals. All
of
these contracts were terminated prior to June 30, 2005. The
following table includes the compensation paid to these entities
during
the three months ended June 30, 2005 and the amounts remaining to be paid
as of
June 30, 2005, pursuant to the termination agreements between the Company
and
the former officers’ respective entities.
|
Payments
Under
Termination
Agreements
for the
Quarter
Ended
|
Remaining
Termination
Payments
as of
|
||||||
|
June
30, 2005
|
June
30, 2005
|
||||||
|
Sunbelt
Financial Concepts
|
$
|
53,000
|
$
|
497,000
|
|||
|
Advertising
Management & Consulting Services, Inc.
|
32,000
|
$
|
339,000
|
||||
|
Advanced
Internet Marketing, Inc.
|
44,000
|
$
|
164,000
|
||||
|
$
|
129,000
|
$
|
1,000,000
|
||||
On
April
1, 2005, the Company and Morris & Miller, Ltd. and Matthew and Markson,
Ltd., (together, the “Shareholders”) entered into a Transfer and Repayment
Agreement (the “Agreement”). Under the Agreement, the Shareholders satisfied all
of their outstanding debt obligations to the Company (previously reflected
as
Advances to Affiliates in the accompanying Consolidated Balance Sheet) as
follows:
|
·
|
The
Shareholders agreed to surrender and deliver to the Company 1,889,566
shares of its common stock previously owned by the Shareholders
(included
in Treasury Stock at June 30, 2005);
|
|
·
|
The
Shareholders forgave $115,865 of debt owed by the Company to the
Shareholders and all related accrued interest;
|
|
·
|
The
Shareholders released any liens they previously had on any shares
of the
Company’s common stock;
|
|
·
|
The
Shareholders assigned certain intellectual property to the Company;
and
|
|
·
|
The
Shareholders agreed to a non-compete and non-solicitation agreement
whereby the Shareholders and their affiliates agree not to compete
with
the Company or solicit any customers for a period of five years.
|
This
transaction resulted in a non-cash charge of $282,000 for the quarter ended
June
30, 2005 equal to the difference between the carrying value of the Advances
to
Affiliates and the value of the consideration received. The fair value of
the
common stock received was $1,606,000 and was based on the market value of
the
common stock as of the date of the agreement. The fair values of the
intellectual property and non-compete and non-solicitation agreement were
$180,000 and $1,821,000 and were determined based on independent appraisals.
The
intellectual property and non-compete
and non-solicitation agreement are included in intangible assets in the
consolidated balance sheet and will be amortized over their estimated useful
lives of 36 and 60 months, respectively.
|
7.
|
CONCENTRATION
OF CREDIT RISK
|
The
Company maintains cash balances at major nationwide institutions in Arizona
and
Nevada. Accounts are insured by the Federal Deposit Insurance Corporation
up to
$100,000. At June 30, 2005, the Company had bank balances exceeding those
insured limits by
approximately $8,679,000.
Financial
instruments that potentially subject the Company to concentrations of credit
risk are primarily trade accounts receivable. The trade accounts receivable
are
due primarily from business customers over widespread geographical locations
within the Local Exchange Carrier (“LEC”) billing areas across the United
States. The Company historically has experienced significant dilution and
customer credits due to billing difficulties and uncollectible trade accounts
receivable. The Company estimates and provides an allowance for uncollectible
accounts receivable. The handling and processing of cash receipts pertaining
to
trade accounts receivable is maintained primarily by two third-party billing
companies. The net receivable due from a single billing services provider
at
June 30, 2005 was $5,203,000, net of an
allowance for doubtful accounts of $509,000. The net receivable from that
billing services provider at June 30, 2005, represents approximately 69%
of the
Company’s total net accounts receivable at June 30, 2005.
|
8.
|
RECENT
ACCOUNTING PRONOUNCEMENTS
|
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
123R, “Share-Based Payment” (“SFAS 123R”). Under this new standard, companies
will no longer be able to account for share-based compensation transactions
using the intrinsic method in accordance with APB 25. Instead, companies
will be
required to account for such transactions using a fair-value method and to
recognize the expense over the service period. This new standard also changes
the way in which companies account for forfeitures of share-based compensation
instruments. SFAS 123R will be effective for fiscal years beginning after
June
15, 2005 and allows for several alternative transition methods. In light
of this
upcoming change, the Company decided
to change its method of accounting for forfeitures of restricted
stock,
under
current GAAP rules
effective October 1, 2004.
See Note
2. The Company expects to adopt the provisions of SFAS 123R in the
first
quarter
of
fiscal 2006
on a
prospective basis and does not expect this to have a material effect on its
financial condition or results of operations.
|
9.
|
SUBSEQUENT
EVENT
|
As
discussed in Note 6, the Company had obligations as of June 30, 2005 to pay
approximately $1,000,000 to former executives and officers under three
termination agreements in exchange for consulting services and non-compete
agreements. In August, 2005, the Company decided to accelerate these payments
and conclude all related consulting activities. As the portion of the
termination payments attributable to consulting services are amortized over
the
contractual period of service, the remaining unamortized balance of
approximately $212,000 at June 30, 2005 will be charged to expense in the
fourth
quarter of fiscal 2005. The non-compete portion of the termination agreements
remain unchanged and will continue to be expensed over the life of the
non-compete agreements.
* * *
|
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
For
a
description of our significant accounting policies and an understanding of
the
significant factors that influenced our performance during the three and
nine
months ended June 30, 2005, this “Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations” (hereafter referred to as
“MD&A”) should be read in conjunction with the Consolidated Financial
Statements, including the related notes, appearing in Item 1 of this Quarterly
Report,
as well
as the Company’s Annual Report on Form 10-KSB for the year ended September 30,
2004.
Forward-Looking
Statements
This
portion of this Quarterly Report on Form 10-Q, includes statements that
constitute “forward-looking statements.” These forward-looking statements are
often characterized by the terms “may,”“believes,”“projects,”“expects,” or
“anticipates,” and do not reflect historical facts. Specific forward-looking
statements contained in this portion of the Quarterly Report include, but
are
not limited to our (i)
assertion that there is an expectation of tremendous growth in online
advertising; (ii) expectation that our adoption of the provisions of SFAS
123R
in the first quarter of fiscal 2006 on a prospective basis will not have
a
material effect on its financial condition or results of operations; (iii)
expectation that our revenues, customer count and operating income will continue
to grow in the fourth quarter of fiscal 2005 as we continue to migrate customers
to alternative billing channels, attract new customers through marketing
initiatives and engage in cost containment activities; and (iv) expectation
that
cost of services will continue to be directly correlated to our usage of
LEC
billing channel.
Forward-looking
statements involve risks, uncertainties and other factors, which may cause
our
actual results, performance or achievements to be materially different from
those expressed or implied by such forward-looking statements. Factors and
risks
that could affect our results and achievements and cause them to materially
differ from those contained in the forward-looking statements include those
identified in the section titled “Risk Factors” in the Company’s Annual Report
on Form 10-KSB for the year ended September 30, 2004, as well as other factors
that we are currently unable to identify or quantify, but that may exist
in the
future.
In
addition, the foregoing factors may affect generally our business, results
of
operations and financial position. Forward-looking statements speak only
as of
the date the statement was made. We do not undertake and specifically decline
any obligation to update any forward-looking statements.
Executive
Overview
This
section presents a discussion of recent developments and summary information
regarding our industry and operating trends only. For further information
regarding the events summarized herein, you should read this MD&A in its
entirety.
Business and Company Overview
We
use a
business model similar to print Yellow Pages publishers. We publish basic
directory listings on the Internet free of charge. Our basic listings contain
the business name, address, and telephone number for over 17 million U.S.
businesses. We strive to maintain a listing for almost every business in
America
in this format.
We
generate revenues from advertisers that desire increased exposure for their
businesses. As described below, advertisers pay us monthly fees in the same
manner that advertisers pay additional fees to traditional print Yellow Pages
providers for enhanced advertisement font, location or display. The users
of our
website are prospective customers for our advertisers, as well as the other
businesses for which we publish basic listings.
Our
primary product is our Internet Advertising Package™, or IAP. Under this
package, advertisers pay for additional exposure by purchasing a Mini-WebPage™.
In order to provide search traffic to our advertiser’s Mini-WebPage, we elevate
the advertiser to a preferred listing status, at no additional charge. We
also
provide our IAP advertisers with enhanced presentation and additional unique
products, such as larger font, bolded business name, map directions, ease
of
communication between our advertisers and users of our website, a link to
the
advertiser’s webpage, as well as other benefits.
Definition
and Explanation of Customer Counts
In
an
effort to bring clarity and transparency to our operations, we believe it
is
important to provide a concise but detailed explanation of how we arrive
at our
customer count set forth in the “Results of Operations - Net Revenues” section
of this MD&A and elsewhere in this Quarterly Report.
Our
customer count metric includes those who were successfully billed for the
month
in which they received a listing, but only includes customers that are not
more
than 30 days past due in paying on their account. Once an account exceeds
the
30-day past due period, the account is no longer considered to be a customer
and
is removed from our customer count. It is important to recognize that activation
alone does not constitute inclusion in our customer count. The customer must
have also been billed through one of our billing channels - LEC, ACH or direct
invoice.
Changes
in Billing Practices
Until
late 2004, we billed most of our customers directly through their monthly
phone
bill (referred to as LEC billing). As discussed in recent SEC filings, our
revenues have been negatively impacted by recent changes in LEC billing
practices, which require us to perform additional procedures to confirm new
and
existing customers before we are allowed to bill via certain local telephone
companies. There has also been an
increasing presence of Competitive Local Exchange Carriers, or CLECs,
in the
local telephone market. If an advertiser changes its telephone service from
a
LEC to a CLEC, we are no longer able to utilize LEC billing channels to bill
for
services, which may adversely impact our revenues.
During
the fiscal quarter ended June 30, 2005, we continued to deal with the impacts
of
the billing issues. As a result, we have made strides to reduce our dependence
on LEC billing and have identified effective alternative methods of billing
our
customers. We
have
migrated a substantial portion of our customers to automated
clearing house, or ACH,
billing,
which is less expensive, has a faster collection time than LEC billing, and
presents minimal dilution. However, it is time-consuming and labor-intensive
to
convert customers from one billing channel to another and can result in missed
billings or customer cancellations. In situations where we cannot bill a
customer via LEC or ACH billing, or in instances where the customer requests
that we bill them directly, we utilize direct invoices. Direct billing has
a
higher percentage of uncollectible accounts than other billing methods and,
therefore, is our least attractive billing option.
The
following represents the breakdown of net billings by channel during recent
fiscal quarters:
|
Q3
2005
|
Q2
2005
|
Q1
2005
|
Q4
2004
|
Q3
2004
|
|
|
LEC
billing
|
23%
|
26%
|
49%
|
67%
|
92%
|
|
ACH
billing
|
64%
|
56%
|
42%
|
30%
|
6%
|
|
Direct
billing
|
13%
|
18%
|
9%
|
3%
|
2%
|
Recent
Financial Results
The
following represents a summary of recent financial results:
|
Q3
2005
|
Q2
2005
|
Q1
2005
|
Q4
2004
|
Q3
2004
|
|
|
Revenues
|
$
6,517,158
|
$6,444,609
|
$6,190,155
|
$10,069,924
|
$16,890,361
|
|
Gross
margin
|
5,591,353
|
5,583,676
|
5,055,571
|
4,990,492
|
8,695,098
|
|
Operating
expenses
|
(5,269,473)
|
(5,199,870)
|
(5,291,031)
|
(5,518,453)
|
(5,213,413)
|
|
Operating
income (loss)
|
321,880
|
383,806
|
(235,459)
|
(527,961)
|
3,481,685
|
|
Net
income (loss)1
|
(149,784)
|
298,280
|
49,072
|
(311,721)
|
2,639,420
|
1
Net
loss
for the third quarter of 2005 includes losses totaling approximately $610,000
relating to non-recurring events as described in the “Other” section of this
Executive Overview
Our
revenues have been adversely affected as we transition from LEC billing to
other
billing methods. During this transitional period, we have experienced increased
customer cancellations and missed billings as we continue to gather the
information necessary to convert customers to more desirable billing methods
such as ACH billing.
Despite
the effects of the transition from LEC billing, we have experienced the
following recent operating trends:
|
·
|
Increased
our quarterly net revenues by approximately 5% during the last
two
quarters
|
|
·
|
Stabilized
our operating expenses over the last three quarters despite incurring
an
estimated $1.1 million of incremental expenses over the last nine
months
associated with the transition from LEC billing to other billing
methods.
This is a result of proactive measures taken to reduce operating
expenses,
including personnel reductions, contract renegotiations, and other
cost
containment measures
|
|
·
|
Increased
quarterly operating income by almost $850,000 since the fourth
quarter of
fiscal 2004 despite a 35% reduction in our quarterly net revenues
during
the same period. This increase is due largely to our use of less-expensive
billing channels and reduced operating expenses as described
above.
|
We
expect
that our revenues and customer count will continue to grow in the fourth
quarter
of fiscal 2005 as we continue to migrate customers to alternative billing
channels and to attract new customers through marketing initiatives. We also
expect to increase operating income in the fourth quarter of fiscal 2005
through
revenue growth and continued cost containment activities.
We
utilize significant estimates and judgments in preparing our financial
statements. These estimates and judgments are evaluated and updated on a
periodic basis. During the fourth quarter of 2005, we will be reevaluating
estimates and judgments pertaining to, among other things, estimated forfeitures
of restricted stock awards used to determine compensation expense and the
estimated average period of retention for new customers used to determine
the
amortization period for customer acquisition costs. Any changes to such
estimates will be recorded using the prospective method, whereby the effect
of
the change is allocated ratably over the remaining periods. Such changes
could
impact our expectation of increasing operating income in the fourth quarter
of
fiscal 2005.
Recent
Developments
On
August
11, 2005, we
decided to accelerate all remaining payments and conclude all related consulting
activities associated with the termination agreements with former executives
and
officers outlined in Note
6 in
the Notes to Unaudited Consolidated Financial Statements. As
the
portion of the termination payments attributable to consulting services are
amortized over the contractual period of service, the remaining unamortized
balance of approximately $212,000 at June 30, 2005 will be charged to expense
in
the fourth quarter of fiscal 2005. The non-compete portion of the termination
agreements remain unchanged and will continue to be expensed over the life
of
the non-compete agreements.
On
August
11, 2005, Alistair Johnson-Clague was appointed to our board of directors
as an
independent director. Mr. Johnson-Clague, President and Chief Executive Officer
of Hard Dollar Corporation, replaces Deval Johnson, who concurrently resigned
as
a director.
Mr.
Johnson-Clague brings to YP Corp. close to 30 years of experience working
in the
information technology industry. At Hard Dollar, Mr. Johnson-Clague’s team is
the leading provider of integrated estimating and job control software for
the
construction management industry. Before joining Hard Dollar, Mr. Johnson-Clague
was the President and General Manager of USinternetworking, Inc. where he
led
the Siebel Business Unit in application, consulting, engineering, partnering
and
marketing decisions. Prior to joining USinternetworking, he served as General
Manager and Vice President of the Software and IBM division of Avnet, Inc.
(NYSE:AVT), a Fortune 500 company specializing in the distribution of
electronics, computers and software. Before Avnet, Mr. Johnson-Clague worked
for
12 years at JBA Holdings Plc, the sixth largest ERP software firm in the
world.
He held numerous positions during his tenure at JBA, including President
of
JBA’s Computer and Software Solutions Divisions. In these roles, he was
responsible for the overall direction of the divisions' financial earnings
and
business plans, customer services, engineering, marketing and human resources
functions. Mr. Johnson-Clague earned a Bachelor of Arts degree in Business
Administration from Napier University in Edinburgh, Scotland.
On
June
23, 2005, John Raven, who has most recently served as our Chief Technology
Officer, was named the Company’s new Chief Operating Officer. Mr. Raven replaces
Penny Spaeth who previously served as Chief Operating Officer.
On
June
8, 2005, we announced that five new national accounts had signed an agreement
to
advertise on our Web site, YP.Com. 1-800-Flowers, DentalPlans.com, 3 Geeks
and a
Mouse, Gurus2Go, and Bids4Rides.com have all chosen to advertise on the site.
They will receive “National-Preferred” status which gives them a preferred
listing in all cities, as well as sending users directly to their Web sites.
If
a user chooses “florists,” for instance, 1-800-Flowers will appear in a featured
box on the screen. Beyond the contextual advertising, 1-800-Flowers will
also
receive run-of-site advertising (appearing under additional categories) during
key holiday periods. To date, these national accounts have not resulted in
significant revenues or operating income. However, they are important to
our
overall strategy.
On
May
19, 2005, we renewed our $1,000,000 revolving line of credit with Merrill
Lynch
Business Financial Services Inc., extending the maturity date from April
30,
2005 to April 30, 2006. All other terms and conditions of the original line
of
credit remain unchanged.
On
May
18, 2005, we announced the adoption of a $3 million stock repurchase program.
To
date, we have not made any repurchases of our stock under the program. For
additional information on repurchases made during the third quarter of fiscal
2005, see Part II, Item 2 below.
During
the third fiscal quarter of 2005, we received an arbitration judgment involving
disputed fees associated with a former public relations firm. Under the terms
of
this judgment, we are obligated to pay $328,000, inclusive of legal fees
and
associated expenses. The loss associated with this judgment was accrued in
the
third fiscal quarter of 2005 and is reflected in other income and expense
in the
accompanying consolidated statement of operations. In accordance with the
terms
of the judgment, we have established a bond in the amount of $365,000 which
is
reflected as restricted cash in the accompanying balance sheet. We are currently
appealing the arbitrator’s decision.
On
April
1, 2005, we entered into a Transfer and Repayment Agreement (the “Agreement”)
with Morris & Miller, Ltd. and Matthew and Markson, Ltd. (together, the
“Shareholders”). Under the Agreement, the Shareholders satisfied all of their
outstanding debt obligations to us (previously reflected as Advances to
Affiliates in the accompanying Consolidated Balance Sheet included elsewhere
in
this report). This transaction resulted in a non-cash charge of $282,000
for the
quarter ended June 30, 2005 equal to the difference between the fair value
of
debt forgiven and the value of the consideration received. This loss is
reflected in Other Income (Expense) in the accompanying Statement of Operations
included elsewhere in this report. See the more detailed discussion of this
matter in note 6 in the Notes to Unaudited Consolidated Financial Statements.
In
connection with the Transfer and Repayment Agreement, we are no longer required
to pay quarterly dividends. Future dividend payments will be evaluated by
the
Board of Directors based upon earnings, capital requirements and financial
position, general economic conditions, alternative uses of capital and other
pertinent factors.
Results
of Operations
Net
Revenues
|
Net
Revenues
|
|||||||||||||
|
2005
|
2004
|
Change
|
Percent
|
||||||||||
|
Three
Months Ended June 30,
|
$
|
6,517,158
|
$
|
16,890,361
|
$
|
(10,373,203
|
)
|
(61
|
)%
|
||||
|
Nine
Months Ended June 30,
|
|
$
|
19,151,922
|
$
|
47,098,181
|
$
|
(27,946,259
|
)
|
(59
|
)%
|
|||
The
decrease in revenues for the three and nine months ended June 30, 2005, as
compared to the corresponding periods ending June 30, 2004, was largely due
to
declines in our paying subscriber base resulting from our LEC billing issues.
The following table sets forth our quarter-end customer counts:
|
Q3
2005
|
Q2
2005
|
Q1
2005
|
Q4
2004
|
Q3
2004
|
Q2
2004
|
Q1
2004
|
||||||
|
108,000
|
105,000
|
95,000
|
196,000
|
224,000
|
265,000
|
253,000
|
We
experienced significant customer count declines from the third quarter of
2004
to the first quarter of 2005 as a result of our transition from LEC billing
to
other billing channels as described in the “Executive Overview” section above.
Since reaching a quarterly low of 95,000 in the first quarter of fiscal 2005,
we
have increased our customer count in each of the last two quarters.
During
the third quarter of fiscal 2005, we were unable to bill approximately 12,000
of
our customers via our LEC channel due to a significant change in the billing
practices of one of our LECs similar to those described in “Executive Overview”
above. While we took measures to transition these customers to alternative
billing channels, our revenues were negatively impacted by this event. Despite
these negative impacts, however, we were still able to increase our customer
count during the third quarter of fiscal 2005. See “Executive Overview -
Explanation of Customer Counts” in
this
MD&A for an explanation of our customer count.
Although
we have concentrations of risk with our billing aggregators (as described
in the
Notes to Unaudited Consolidated Financial Statements included elsewhere in
this
Quarterly Report) these aggregators bill via many underlying LECs. As we
no
longer have any significant concentrations of customers with any single LEC,
we
do not expect any future changes in billing practices with our remaining
LECs to
have a material adverse impact on our net revenues.
The
price
for our IAP product ranges from $17.95 to $29.95 per month.
Cost of Services
|
Cost
of Services
|
|||||||||||||
|
2005
|
2004
|
Change
|
Percent
|
||||||||||
|
|
|||||||||||||
|
Three
Months Ended June 30,
|
$
|
925,805
|
$
|
8,195,264
|
$
|
(7,269,459
|
)
|
(89
|
)%
|
||||
|
Nine
Months Ended June 30,
|
|
$
|
2,921,322
|
$
|
19,678,248
|
$
|
(16,756,926
|
)
|
(85
|
)%
|
|||
The
decrease in our cost of services is directly attributable to a reduction
in our
dilution expense as a result of our transition from LEC billing to alternative
billing methods. Billings through LEC channels, which drives a substantial
majority of our dilution expense, decreased to 23% of total billings in the
third quarter of fiscal 2005 from over 95% of total billings in the third
quarter of fiscal 2004. A significant portion of these customers were converted
to ACH and direct billing methods, which have minimal dilution. We expect
cost
of services to continue to be directly correlated to our usage of LEC billing
channels.
Gross
Profit
|
Gross
Profit
|
|||||||||||||
|
2005
|
2004
|
Change
|
Percent
|
||||||||||
|
Three
Months Ended June 30,
|
$
|
5,591,353
|
$
|
8,695,097
|
$
|
(3,103,744
|
)
|
(36
|
)%
|
||||
|
Nine
Months Ended June 30,
|
$
|
16,230,600
|
$
|
27,419,933
|
$
|
(11,189,333
|
)
|
(41
|
)%
|
||||
The
decrease in our gross profits was due to decreased revenues resulting from
the
previously mentioned decrease in IAP advertisers, offset in part by the
decreased dilution as discussed above. Gross margins increased to 85.8% of
net
revenues in the third quarter of fiscal 2005 compared to 51.5% of net revenues
in the third quarter of fiscal 2004 due to decreased dilution in fiscal 2005.
General
and Administrative Expenses
|
General
and Administrative Expenses
|
|||||||||||||
|
2005
|
2004
|
Change
|
Percent
|
||||||||||
|
Three
Months Ended June 30,
|
$
|
3,320,434
|
$
|
3,271,624
|
$
|
48,810
|
1
|
%
|
|||||
|
Nine
Months Ended June 30,
|
$
|
9,886,929
|
$
|
9,142,889
|
$
|
744,040
|
8
|
%
|
|||||
General
and administrative expenses were largely consistent for the third quarter
of
fiscal years 2005 and 2004. However, there were changes to certain components
of
such expenses. During the third quarter of fiscal 2005, as compared to the
third
quarter of fiscal 2004, we experienced increased costs of approximately $293,000
associated with our efforts to reconfirm our existing subscriber base and
increased non-cash compensation costs of approximately $350,000 associated
with
restricted stock awards to employees. These increases were offset by decreased
legal costs associated with the conclusion of several outstanding legal matters
in fiscal 2004, and general expense reductions associated with cost-containment
initiatives. General and administrative expenses for the first nine months
of
fiscal 2005 were higher than the first nine months of fiscal 2004 due primarily
to increased costs of approximately $527,000 associated with reconfirming
existing customers and $582,000 for expenses related to ACH notices, paper
invoices and other customer mailings associated with the conversion of many
of
our customers from LEC billing to other billing methods. This was partially
offset by reduced legal costs.
Our general and administrative expenses consist largely
of
fixed expenses such as compensation, rent, utilities, etc.
Therefore, we do not consider short-term trends of general and administrative
expenses as a percent of revenues to be meaningful indicators for evaluating
operational performance.
We
have
been successful in reducing our general and administrative expenses, despite
incurring significant costs associated with the transition from LEC billing
to
acceptable alternate billing methods. The following table sets forth our
recent
operating performance for general and administrative expenses:
|
Q3
2005
|
Q2
2005
|
Q1
2005
|
Q4
2004
|
Q3
2004
|
||||||||||||
|
Reconfirmation,
mailing, billing and other customer-related costs
|
$
|
535,861
|
$
|
635,624
|
$
|
309,592
|
$
|
132,390
|
$
|
244,324
|
||||||
|
Compensation
for employees, consultants, officers and directors
|
2,184,131
|
1,937,592
|
2,265,863
|
2,458,735
|
2,029,536
|
|||||||||||
|
Other
G&A costs
|
600,442
|
608,428
|
809,396
|
950,677
|
1,029,252
|
|||||||||||
Sales
and Marketing Expenses
|
Sales
and Marketing Expenses
|
|||||||||||||
|
2005
|
2004
|
Change
|
Percent
|
||||||||||
|
Three
Months Ended June 30,
|
$
|
1,565,536
|
$
|
1,667,040
|
$
|
(101,504
|
)
|
(6
|
)%
|
||||
|
Nine
Months Ended June 30,
|
$
|
4,896,063
|
$
|
4,403,385
|
$
|
492,678
|
11
|
%
|
|||||
Sales
and
marketing expense decreased in the third quarter of fiscal 2005 as compared
to
the third quarter of fiscal 2004 due to decreased amortization of capitalized
direct marketing expenses. We temporarily suspended a portion of our direct
marketing activities as we transitioned a substantial amount of our customers
to
different billing channels over the last few quarters. We resumed our normal
levels of direct marketing activity in January 2005.
During
the first nine months of 2005, as compared to 2004, we experienced approximately
$360,000 of increased expenditures for brand awareness as we attempt to increase
traffic to our website (prior to September of 2004, page views were below
54,000,000 per month; current page views exceed 134,000,000 per month or
a
nearly 150% increase in monthly page views). Branding expenses include radio
and
Internet advertising and fees paid to redirect traffic from other websites.
The
remaining increase was primarily due to increased amortization expense in
2005
as compared to 2004 as there was a substantial increase in mailings during
the
second and third fiscal quarters of 2004 (i.e., there was less amortization
in
the first quarter of 2004 as compared to the first quarter of
2005).
We
capitalize certain direct marketing expenses and amortize those costs over
an
18-month period based on the estimated
IAP advertiser attrition rates. A substantial portion of the current period
expense relates to the amortization of costs previously incurred, thereby
creating a significant fixed component of this expense. Accordingly, revenue
declines resulted in our sales and marketing expenses increasing as a percentage
of revenues to 24.0% for the third quarter of fiscal 2005 compared to 9.9%
for
the third quarter of fiscal 2004.
Depreciation and Amortization
|
Depreciation
and Amortization
|
|||||||||||||
|
2005
|
2004
|
Change
|
Percent
|
||||||||||
|
Three
Months Ended June 30,
|
$
|
383,503
|
$
|
243,261
|
$
|
140,242
|
58
|
%
|
|||||
|
Nine
Months Ended June 30,
|
$
|
977,382
|
$
|
639,173
|
$
|
338,209
|
53
|
%
|
|||||
The
increase in depreciation and amortization expense is attributable to
(i)
increased
depreciation due to additional purchases of equipment related to our upgrade
in
infrastructure in the information technology department and hardware purchased
relating to our quality assurance and outbound marketing initiatives,
and
(ii)
increased amortization of intangible assets associated with website development
costs that were capitalized during 2004 and 2005. Amortization relating to
the
capitalization of our direct mail marketing costs is included in marketing
expenses, as discussed previously.
Operating
Income
|
Operating
Income
|
|||||||||||||
|
2005
|
2004
|
Change
|
Percent
|
||||||||||
|
Three
Months Ended June 30,
|
$
|
321,880
|
$
|
3,513,172
|
$
|
(3,191,292
|
)
|
(91
|
)%
|
||||
|
Nine
Months Ended June 30,
|
$
|
470,226
|
$
|
13,234,486
|
$
|
(12,764,260
|
)
|
(96
|
)%
|
||||
Our
operating income declined substantially due primarily to revenue declines
as
previously described.
Other
Income (Expense)
|
Other
Income (Expense)
|
|||||||||||||
|
2005
|
2004
|
Change
|
Percent
|
||||||||||
|
Three
Months Ended June 30,
|
$
|
(584,988
|
)
|
$
|
436,464
|
$
|
(1,021,452
|
)
|
(234
|
)%
|
|||
|
Nine
Months Ended June 30,
|
$
|
(477,535
|
)
|
$
|
782,617
|
$
|
(1,260,152
|
)
|
(161
|
)%
|
|||
Other
income (expense) in the third quarter of fiscal 2005 consisted primarily
of the
following:
|
·
|
A
loss of $282,000 from the Transfer and Repayment Agreement as described
above in the Executive Overview section of this MD&A and in Note 6 in
the Notes to Unaudited Consolidated Financial Statements. This
amount is
equal to the difference between the carrying value of Advances
to
Affiliates and the value of the consideration received.
|
|
·
|
A
loss of $328,000 from an arbitration judgment involving disputed
fees
associated with a former public relations firm described above
in the
Executive Overview section of this MD&A.
|
Income
Tax Benefit (Provision)
|
Income
Tax Benefit (Provision)
|
|||||||||||||
|
2005
|
2004
|
Change
|
Percent
|
||||||||||
|
Three
Months Ended June 30,
|
$
|
83,465
|
$
|
(1,409,113
|
)
|
$
|
1,492,578
|
(106
|
)%
|
||||
|
Nine
Months Ended June 30,
|
$
|
(92,982
|
)
|
$
|
(4,992,994
|
)
|
$
|
4,900,012
|
(98
|
)%
|
|||
The
change in our income tax benefit (provision) for the third quarter of fiscal
2005 as compared to fiscal 2004 is due almost entirely to our decrease in
profitability.
Cumulative
Effect of Accounting Change
|
Cumulative
Effect of Accounting Change
|
|||||||||||||
|
2005
|
2004
|
Change
|
Percent
|
||||||||||
|
Three
Months Ended June 30,
|
$
|
-
|
$
|
-
|
$
|
-
|
0
|
%
|
|||||
|
Nine
Months Ended June 30,
|
$
|
99,848
|
$
|
-
|
$
|
99,848
|
100
|
%
|
|||||
During
the first fiscal quarter of 2005, we changed our method of accounting for
forfeitures of restricted stock awards to employees, officers, and directors.
Prior to October 1, 2004, we recognized forfeitures as they occurred.
Upon
occurrence, we reversed the previously recognized expense associated with
such
grant. Effective October 1,
2004,
we
changed to an expense recognition method that is based on an estimate of
the
number of shares that are ultimately expected to vest. We believe that this
is a
preferable method as it provides less volatility in expense recognition.
Additionally, while both methods of accounting for forfeitures are acceptable
under current guidance, the implementation of FAS 123R
(effective during the first
quarter of fiscal 2006) will no longer permit us to recognize forfeitures
as
they occur.
This
change resulted in an increase to net income of $99,848, net of income taxes
of
$53,764, during the first quarter of fiscal 2005.
Net
Income (Loss)
|
Net
Income (Loss)
|
|||||||||||||
|
2005
|
2004
|
Change
|
Percent
|
||||||||||
|
Three
Months Ended June 30,
|
$
|
(149,784
|
)
|
$
|
2,639,420
|
$
|
(2,789,204
|
)
|
(106
|
)%
|
|||
|
Nine
Months Ended June 30,
|
$
|
197,568
|
$
|
9,272,704
|
$
|
(9,075,136
|
)
|
(98
|
)%
|
||||
We
reported a net
loss
for the third quarter of fiscal 2005, as compared to a net profit for the
corresponding period of fiscal 2004. The substantial decrease in net income
for
the three and nine months ended June 30, 3005 is due primarily to decreased
revenues. As a percentage of revenues, net income was (2.3)% for the third
quarter of fiscal 2005 as compared to 15.6% for the third quarter of fiscal
2004. As a significant portion of our expenses are fixed, our profitability
margins are negatively impacted by declines in revenue. The reported loss
also
includes one-time charges of $282,000 related to the M&M agreement and the
$328,000 charge for the judgment related to the aforementioned legal
matter.
Liquidity
and Capital Resources
Net
cash
provided by operating activities increased $3,889,807, or 135.5 %, to $6,759,809
for the nine months ended June 30, 2005, compared to $2,870,002 for the nine
months ended June 30, 2004. The increase in cash generated from operations
is
primarily due to a) the conversion of many of our customers from LEC billing
to
alternate billing channels that have a shorter collection time and b) lower
marketing expenditures during the first nine months of 2005 as we worked
to
resolve the previously discussed billing issues.
Our
primary source of cash inflows is net remittances from our billing channels,
including LEC billings and ACH billings. For LEC billings, we receive
collections on accounts receivable through the billing service aggregators
under
contracts to administer this billing and collection process. The billing
service
aggregators generally do not remit funds until they are collected. Generally,
cash is collected and remitted to us (net of dilution and other fees and
expenses) over a 60- to 120-day period subsequent to the billing dates.
Additionally, for each monthly billing cycle, the billing aggregators and
LECs
withhold certain amounts, or “holdback reserves,” to cover potential future
dilution and bad debt expense. These holdback reserves lengthen our cash
conversion cycle as they are remitted to us over a 12- to 18-month period
of
time. We classify these holdback reserves as current or long-term receivables
on
our balance sheet, depending on when they are scheduled to be remitted
to us.
For ACH billings, we generally receive the net proceeds through our billing
service processors within 15 days of submission. Additionally, approximately
69%
of our accounts receivable are due from a single
aggregator.
Our
most
significant cash outflows include payments for marketing expenses and general
operating expenses. Cash outflows for direct response advertising, our primary
marketing strategy, typically occur in advance of expense recognition as
these
costs are capitalized and amortized over 18 months, the average estimated
retention period for new customers. General operating cash outflows consist
of
payroll costs, income taxes, and general and administrative expenses that
typically occur within close proximity of expense recognition.
Net
cash
used for investing activities totaled $391,138 for the first nine months
of
fiscal 2005 and consisted of expenditures for intangible assets and minor
purchases of equipment. During the first nine months of fiscal 2004, cash
used
for investing activities was $2,202,736 of which the primary component was
advances to affiliates of $2,725,000.
Net
cash
used for financing activities was $940,910 for the first nine months of fiscal
2005 and consisted primarily of payments of common stock dividends of $940,355.
Cash used for financing activities for the nine months ended June 30, 2004
were
$499,983 and consisted solely of payments of common stock dividends.
We
had
working capital of $15,148,754 as of June 30, 2005, compared to $12,484,833
as
of September 30, 2004. Our cash position increased during the past nine months
to over $9,000,000 at June 30, 2005 from approximately $3,500,000 at the
end of
fiscal 2004. Despite our near breakeven performance during the first nine
months
of fiscal 2005, our operating expenses consist of a substantial amount of
non-cash expenses, such as amortization of customer acquisition costs and
deferred stock compensation, which allows us to continue to grow our cash
and
working capital.
We
do not
expect the foregoing trend of significantly increasing our cash position
to
continue at the current rate. Our future cash flows may be impacted by a
number
of factors, including the following:
|
·
|
The
payment of approximately $1,000,000 for termination of various
consulting
agreements
|
|
·
|
Potential
repurchases of up to $3 million our common stock from time to time
on the
open market or in privately negotiated transactions as authorized
by our
Board of Directors
|
|
·
|
Increased
marketing expenditures
|
We
maintain a $1,000,000 credit facility with Merrill Lynch Business Financial
Services Inc., The applicable interest rate on borrowings, if any, will be
a
variable rate of the one-month LIBOR rate (as published in the Wall
Street Journal),
plus
3%. The facility requires an annual line fee of 1% of the committed amount.
Outstanding advances are secured by all of our existing and acquired tangible
and intangible assets located in the United States. There was no balance
outstanding at June 30, 2005. The line has been renewed for an additional
one-year period, extending the maturity date to April 30, 2006.
The
credit facility requires us to maintain a “Leverage Ratio” (total liabilities to
tangible net worth) that does not exceed 1.5-to-1 and a “Fixed Charge Ratio”
(earnings before interest, taxes, depreciation, amortization and other non-cash
charges minus any internally financed capital expenditures divided by the
sum of
debt service, rent under capital leases, income taxes and dividends) that
is not
less that 1.5-to-1 as determined quarterly on a 12-month trailing basis.
The
credit facility includes additional covenants governing permitted indebtedness,
liens, and protection of collateral. As of June 30, 2005, we were in compliance
with the covenants and are able to fully draw on the credit
facility.
Until
April 1, 2005, we were contractually obligated to pay a $0.01 per share dividend
each quarter, subject to compliance with applicable laws, to all common
stockholders, including those who hold unvested restricted stock. The quarterly
dividend associated with the third fiscal quarter of 2005 was declared and
paid
in July 2005 and, therefore, was not accounted for in the three months ended
June 30, 2005.
In
connection with the Transfer and Repayment Agreement described in the Executive
Overview section of this MD&A, we are no longer required to pay quarterly
dividends. Future dividend payments will be evaluated by the Board of Directors
based upon earnings, capital requirements and financial position, general
economic conditions, alternative uses of capital and other pertinent
factors.
During
the third quarter of fiscal 2005, our Board of Directors authorized the
repurchase of up to $3 million of our common stock from time to time on the
open
market or in privately negotiated transactions. To date, we have not made
any
repurchases of our stock under the program.
The
following table summarizes our contractual obligations at June 30, 2005 and
the
effect such obligation are expected to have on our future liquidity and cash
flows:
|
Payments
Due by
Period
|
||||||||||||||||||||||
|
Total
|
Remainder
of
2005
|
2006
|
2007
|
2008
|
2009
|
Thereafter
|
||||||||||||||||
|
Contractual
obligations
|
||||||||||||||||||||||
|
Lease
commitments
|
$
|
444,000
|
$
|
74,000
|
$
|
336,000
|
$
|
29,000
|
$
|
5,000
|
$
|
-
|
$
|
-
|
||||||||
|
Termination
agreements
|
1,000,000
|
1,000,000
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
|
$
|
1,444,000
|
$
|
1,074,000
|
$
|
336,000
|
$
|
29,000
|
$
|
5,000
|
$
|
-
|
$
|
-
|
|||||||||
Although
our revenues have recently declined and we have only been slightly profitable
for the first nine months of fiscal 2005, we believe that our existing cash
on
hand will provide us with sufficient liquidity to meet our operating needs
for
the next twelve months.
* * *
|
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
As
of
June 30, 2005, we did not participate in any market risk-sensitive commodity
instruments for which fair value disclosure would be required under Statement
of
Financial Accounting Standards No. 107. We believe that we are not subject
in
any material way to other forms of market risk, such as foreign currency
exchange risk or foreign customer purchases (of which there were none in
the
first nine months of fiscal 2005 or in any of 2004) or commodity price
risk.
|
ITEM
4.
|
CONTROLS
AND PROCEDURES
|
Disclosure
controls and procedures are designed with an objective of ensuring that
information required to be disclosed in our periodic reports filed with the
Securities and Exchange Commission, such as this Quarterly Report on Form
10-Q,
is recorded, processed, summarized and reported within the time periods
specified by the Securities and Exchange Commission. Disclosure controls
are
also designed with an objective of ensuring that such information is accumulated
and communicated to our management, including our chief executive officer
and
chief financial officer, in order to allow timely consideration regarding
required disclosures.
The
evaluation of our disclosure controls by our principal executive officer
and
principal financial officer included a review of the controls’ objectives and
design, the operation of the controls, and the effect of the controls on
the
information presented in this Quarterly Report. Our management, including
our
chief executive officer and chief financial officer, does not expect that
disclosure controls can or will prevent or detect all errors and all fraud,
if
any. A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. Also, projections of any evaluation of the disclosure controls
and procedures to future periods are subject to the risk that the disclosure
controls and procedures may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.
Based
on
their review and evaluation as of the end of the period covered by this Form
10-Q, and subject to the inherent limitations all as described above, our
principal executive officer and principal financial officer have concluded
that
our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934) are effective as of
the end
of the period covered by this report. They are not aware of any significant
changes in our disclosure controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation, including
any
corrective actions with regard to significant deficiencies and material
weaknesses. During the period covered by this Form 10-Q, there have not been
any
changes in our internal control over financial reporting that have materially
affected, or that are reasonably likely to materially affect, our internal
control over financial reporting.
PART II - OTHER
INFORMATION
|
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
Issuer
Purchases of Equity Securities
|
Period
|
(a)
Total Number of Shares (or Units) Purchased
|
(b)
Average Price Paid per Share (or Unit)
|
(c)
Total Number of Shares (or Units) Purchased as Part of Publicly
Announced
Plans or Programs
|
(d)
Maximum Number (or Approximate Dollar Value) of Shares (or
Units) that May
Yet Be Purchased Under the Plans or Programs
|
|
April
2005
|
1,889,566(1)
|
0.85
|
0
|
N/A
|
|
May
2005
|
0
|
N/A
|
0
|
N/A
|
|
June
2005
|
0
|
N/A
|
0
|
N/A
|
|
Total
|
1,889,566
|
0.85
|
0
|
$3,000,000(2)
|
(1)
On
April
1, 2005, YP Corp. and Morris & Miller, Ltd. and Matthew and Markson, Ltd.
(together, the “Shareholders”) entered into a Transfer and Repayment Agreement
(the “Agreement”). Under the Agreement, the Shareholders satisfied all of their
outstanding debt obligations to the Company in part by agreeing to surrender
and
deliver to the Company 1,889,566 shares of the Company’s common stock previously
owned by the Shareholders. The fair value of the shares were determined
based on
the market value at the date of the transaction.
(2)
On May
18, 2005, we announced the adoption of a $3 million stock repurchase program.
To
date, we have not made any repurchases of our stock under the
program.
|
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
|
We
held
our 2005 Annual Meeting of Stockholders on April 6, 2005. The following nominees
were elected to the Company’s Board of Directors to serve for the terms
indicated or until the earlier of their resignation or election and
qualification of their successors:
|
Nominee
|
Class
|
Term
Ending
|
Votes
in Favor
|
Votes
Withheld
|
||||
|
John
T. Kurtzweil
|
III
|
2008
|
46,519,183
|
380,031
|
||||
|
Paul
Gottlieb
|
III
|
2008
|
46,518,443
|
380,771
|
In
addition to the foregoing directors, the following individuals continued
to
serve as directors. The following individuals are not due for reelection
until
the date specified:
|
Name
|
Class
|
Current
Term
|
||
|
Peter
Bergmann
|
I
|
2006
|
||
|
DeVal
Johnson
|
II
|
2007
|
||
|
Daniel
L. Coury, Sr.
|
II
|
2007
|
Additionally,
the Company’s stockholders voted upon a proposal to ratify the
appointment of Epstein, Weber & Conover, P.L.C., as our independent auditors
for the fiscal year ending September 30, 2005.
|
Votes
in Favor
|
Opposed
|
Abstained
|
Broker
Non-Vote
|
|||
|
46,401,908
|
491,406
|
-
|
-
|
|
ITEM
6.
|
EXHIBITS
|
The
following exhibits are either attached hereto or incorporated herein by
reference as indicated:
|
Exhibit
Number
|
Description
|
|
10.1
|
Transfer
and Repayment Agreement, dated April 1, 2005, by and among YP Corp.,
Morris & Miller, Ltd. and Matthew and Markson,
Ltd.
|
|
10.2
|
YP
Corp. Line of Credit Renewal Letter from Merrill Lynch Business
Financial
Services Inc., dated May 19, 2005
|
|
31
|
Certifications
pursuant to SEC Release No. 33-8238, as adopted pursuant to Section
302 of
the Sarbanes-Oxley Act of 2002
|
|
32
|
Certifications
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
YP.CORP.
|
||
|
Dated:
August 15, 2005
|
/s/
W. Chris Broquist
|
|
|
W.
Chris Broquist
|
||
|
Chief
Financial Officer
|
EXHIBIT
INDEX
|
Exhibit
Number
|
Description
|
|
Transfer
and Repayment Agreement, dated April 1, 2005, by and among YP Corp.,
Morris & Miller, Ltd. and Matthew and Markson,
Ltd.
|
|
YP
Corp. Line of Credit Renewal Letter from Merrill Lynch Business
Financial
Services Inc., dated May 19, 2005
|
|
Certifications
pursuant to SEC Release No. 33-8238, as adopted pursuant to Section
302 of
the Sarbanes-Oxley Act of 2002
|
|
Certifications
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002
|