K2 Design's Third Quarter Net Revenues Up 88% Over Last Quarter,
29% Over Third Quarter Last Year
NEW YORK--(BUSINESS WIRE)--Oct. 28, 1999--K2 Design, Inc. (NASDAQ: KTWO, KTWOW),
a full-service e-communications agency, known for its strength in World Wide Web-based marketing,
today reported results for the quarter ended September 30, 1999.
Net revenue for third quarter 1999 was $1,242,000, compared to $962,000 for the same period last year,
a 29% increase which surpasses previous quarter net revenue of $658,000 by 88%. (Net revenue
represents gross revenue minus media cost of sales and reimbursable expense pass-through billings).
Gross revenue for third quarter 1999 was $1,706,000, surpassing the previous quarter gross revenue of
$822,000 by 108%, and representing a decrease of 10% compared to $1,901,000 for the same period
last year.
Net income for third quarter was $266,000, compared to a loss for the same period last year of
$339,000. Earnings this quarter were reduced by a compensation charge of $165,000. EPS was $0.08
and $0.07 per basic and diluted share respectively for the third quarter 1999, as compared to $(0.10) per
basic and diluted share for the same period last year.
"The results reflect our evolving profile from an online advertising agency to a technology-focused
professional services firm. Using our W3 Organizational Modeling(TM), we are providing fee-based
strategic and process consulting, as well as technical development, design and marketing of ROI-driven
e-communications initiatives," said Matthew de Ganon, executive chairman of K2 Design.
"The changing service mix resulted in fewer media placements in traditional venues, such as newspaper
and radio, as the gross revenue demonstrates, and stronger fee-based consulting, which resulted in
higher net revenue.
"As stated in our last earnings release, we acquired new clients during the second quarter and that
intensive business-building has resulted in our net revenue momentum. We are pleased that new clients
like the Puerto Rico Convention Bureau have been so receptive to our ROI-driven consulting and web
design approach. Our third quarter earnings also reflect ongoing relationships with clients like Standard
& Poor's and NCR. We expect to announce additional and important accounts acquired during the third
quarter as soon as the proper client approvals have been obtained."
The company also chose to repurchase 90,000 shares of its stock as part of a stock buyback program
that mirrors the company's confidence and drive on behalf of its stockholders. K2 recently received
industry recognition as one of three finalists for a 1999 NewMedia INVISION Award in the Travel
category for its creation of the "Meet Puerto Rico" Website for the Puerto Rico Convention Bureau. In
addition, K2 was ranked Number Six in the 1999 New York Technology Fast 50, a list of the 50 fastest
growing technology companies in the New York City area, according to the professional services firm,
Deloitte & Touche.
K2 Design, Inc., a New York City-based company, is a full-service e-communications agency. The
firm is known for its strength in World Wide Web-based marketing, and was the first interactive agency
to be accepted into the American Association of Advertising Agencies (AAAAs). The agency
combines award-winning creative with pioneering marketing, media and technical expertise to deliver a
measurable ROI on Web-based marketing programs. K2's proprietary techniques include W3
Organizational Modeling(TM) and Insight Marketing Surveys(TM) which provide business solutions for
the emerging digital economy. K2 clients include Arthur Andersen, NCR, Puerto Rico Convention
Bureau, Sony Online Entertainment and Standard & Poor's. More information about K2 is available on
the World Wide Web at www.k2design.com.
K2 DESIGN, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
September 30, 1999
------------------
(unaudited)
ASSETS
------
Current Assets:
---------------
Cash & cash equivalents $ 2,348,885
Accounts receivable, net of allowance
for doubtful accounts of $100,000 1,398,226
Unbilled revenue 343,964
Prepaid expenses and other current assets 73,146
Investment in securities, at cost 1,679,450
-----------
Total current assets 5,843,671
Fixed assets, net 585,248
Restricted cash 150,711
Other assets 4,710
Total assets $ 6,584,340
===========
LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
Current Liabilities:
--------------------
Current portion of capital lease obligations $ 21,108
Accounts payable 501,439
Accrued compensation & payroll taxes 234,185
Deferred revenue 67,542
Other accrued expenses 530,672
Customer advances 88,821
-----------
Total current liabilities 1,443,767
Long-term capital lease obligations 21,839
Stockholders' equity:
---------------------
Preferred stock, $0.01 par value,
1,000,000 shares authorized;
0 shares issued and outstanding --
Common stock, $0.01 par value
9,000,000 shares authorized;
3,741,251 shares issued;
3,404,901 shares outstanding 37,412
Treasury stock; 336,350 shares (585,981)
Additional paid-in capital 6,656,113
Accumulated deficit (988,810)
-----------
Total stockholders' equity 5,118,734
Total liabilities & stockholders' equity $ 6,584,340
===========
K2 DESIGN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended Nine Months Ended
------------------ -----------------
9/30/99 9/30/98 9/30/99 9/30/98
------- ------- ------- -------
(unaudited) (unaudited) (unaudited) (unaudited)
----------- ----------- ----------- -----------
Revenues $ 1,705,708 $ 1,901,265 $ 3,971,914 $ 5,936,879
Direct salaries
and costs $ 989,361 $ 1,448,140 $ 3,120,708 $ 4,116,233
Selling, general
and administrative
expenses $ 836,467 $ 655,281 $ 2,188,208 $ 1,876,395
Depreciation $ 101,595 $ 86,539 $ 301,400 $ 263,818
-----------------------------------------------
Loss from continuing
operations before
interest & other
income, net, income
taxes and discontinued
operations, net $ (221,715)$ (288,695)$(1,638,402)$ (319,567)
Interest and other
income, net $ 464,170 $ 76,322 $ 2,044,251 $ 135,306
Provision for
income taxes $ (24,128)$ 18,870 $ 33,073 $ 21,307
-----------------------------------------------
Income (loss) from
continuing operations $ 266,583 $ (231,243)$ 372,776 $ (205,568)
Loss from discontinued
operations $ -- $ -- $ -- $ (85,309)
Gain (Loss) from
sale of discontinued
operations $ -- $ (107,919)$ -- $ 2,994,204
-----------------------------------------------
Net Income $ 266,583 $ (339,162)$ 372,776 $ 2,703,327
===============================================
Income (loss) per
share from continuing
operations -
Basic $ 0.08 $ (0.07)$ 0.11 $ (0.06)
-----------------------------------------------
Diluted $ 0.07 $ (0.07)$ 0.10 $ (0.06)
-----------------------------------------------
Loss per share from
discontinued
operations -
Basic $ -- $ -- $ -- $ (0.02)
-----------------------------------------------
Diluted $ -- $ -- $ -- $ (0.02)
-----------------------------------------------
Gain from sale of
discontinued
operations -
Basic $ -- $ (0.03)$ -- $ 0.83
-----------------------------------------------
Diluted $ -- $ (0.03)$ -- $ 0.81
-----------------------------------------------
Net Income per share -
Basic $ 0.08 $ (0.10)$ 0.11 $ 0.75
===============================================
Diluted $ 0.07 $ (0.10)$ 0.10 $ 0.73
===============================================
Weighted average basic
common shares
outstanding 3,479,687 3,508,579 3,474,286 3,591,292
===============================================
Weighted average diluted
common shares
outstanding 3,665,191 3,508,579 3,630,318 3,691,272
===============================================
Except for the historical information herein, the matters discussed in this news release include
forward-looking statements that may involve a number of risks and uncertainties. Future results may
vary significantly based on a number of factors including, but not limited to, risks in market acceptance
of new products and services and continuing demand for same, the impact of competitive products and
pricing, seasonality, changing economic conditions and other risk factors detailed in the Company's most
recent annual report and other filings with the Securities and Exchange Commission. |
