x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _________ TO _________

Commission File No. 0-25681

(Exact name of registrant as specified in its charter)

Florida

65-0423422

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

11811 U.S. Highway One, Suite 101

North Palm Beach, Florida

33408

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (561) 630-2400

Yes   x

No   o

Yes   o

No   x

PAGE NO.

PART I.

FINANCIAL INFORMATION

Item 1.

Interim Condensed Financial Statements (Unaudited):

Condensed Balance Sheets at March 31, 2003 and December 31, 2002

3

Condensed Statements of Operations for the Three Months Ended March 31, 2003 and 2002

4

Condensed Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002

5

Notes to Condensed Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

10

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

15

Item 4.

Controls and Procedures

15

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

15

Item 2.

Changes in Securities and Use of Proceeds

15

Item 3.

Defaults Upon Senior Securities

15

Item 4.

Submission of Matters to a Vote of Security Holders

15

Item 5.

Other Information

15

Item 6.

Exhibits and Reports on Form 8-K

16

Signatures  

16

               This Report and our other communications and statements may contain “forward-looking statements,” including statements about our beliefs, plans, objectives, goals, expectations, estimates, projections and intentions.  These statements are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond our control.  For information concerning these factors and related matters, see Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in this Report, and the following sections of our Annual Report on Form 10-K for the year ended December 31, 2002 (the “2002 Form 10-K”): (a) “Risk Factors” in Item 1, “Business,” and (b) “Introduction” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

March 31,
2003

December 31,
2002

Assets

Cash and cash equivalents

$

12,843,316

$

11,000,561

Accounts receivable, net of allowance for doubtful accounts of $200,000 at March 31, 2003 and December 31, 2002

3,011,368

2,378,535

Other current assets

384,998

370,886

Total current assets

16,239,682

13,749,982

Furniture, fixtures and equipment, net

793,889

912,651

Intangible assets, net

177,662

206,915

Other assets

561,826

303,547

Total assets

$

17,773,059

$

15,173,095

Liabilities and Stockholders’ Equity

Liabilities:

Accounts payable

$

1,070,695

$

809,068

Accrued expenses

2,650,834

3,072,771

Deferred revenue

264,989

255,081

Other current liabilities

241,411

243,891

Total current liabilities

4,227,929

4,380,811

Other liabilities

175,704

142,226

Total liabilities

4,403,633

4,523,037

Stockholders’ equity:

Preferred stock, 10,000,000 shares authorized and undesignated

—  

—  

Common stock, par value $.01 per share-- 100,000,000 shares authorized; 14,206,609 and 13,998,168 shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively

142,066

139,982

Additional paid in capital

64,631,167

63,932,578

Accumulated deficit

(51,403,807

)

(53,422,502

)

Total stockholders’ equity

13,369,426

10,650,058

Total liabilities and stockholders’ equity

$

17,773,059

$

15,173,095

Three Months Ended
March 31,

2003

2002

Revenue:

Online publishing

$

7,334,193

$

4,712,969

Print publishing and licensing

1,212,393

923,949

Total revenue

8,546,586

5,636,918

Cost of revenue:

Online publishing

1,240,412

882,097

Print publishing and licensing

1,008,406

671,763

Total cost of revenue

2,248,818

1,553,860

Gross margin

6,297,768

4,083,058

Operating expenses:

Sales

1,026,386

850,884

Marketing

1,197,634

923,595

Product development

432,332

329,880

General and administrative

1,470,050

1,134,227

Depreciation and amortization

191,063

143,707

4,317,465

3,382,293

Income from operations

1,980,303

700,765

Interest income (expense), net

38,392

(10,834

)

Gain on early extinguishment of debt

—  

2,021,792

Income before income taxes

2,018,695

2,711,723

Income taxes

—  

—  

Net income

$

2,018,695

$

2,711,723

Basic and diluted net income per share:

Basic

$

0.14

$

0.19

Diluted

$

0.13

$

0.19

Weighted average common shares outstanding:

Basic

14,162,059

13,996,950

Diluted

15,423,056

14,066,486

Three Months Ended
March 31,

2003

2002

Cash flows from operating activities:

Net income

$

2,018,695

$

2,711,723

Adjustments to reconcile net income to net cash provided by operating activities:

Gain on early extinguishment of debt

—  

(2,021,792

)

Depreciation and amortization

191,063

143,707

Changes in operating assets and liabilities:

(Increase) in accounts receivable

(632,833

)

(379,039

)

(Increase) in other assets

(277,665

)

(227,558

)

Increase in accounts payable

261,627

47,371

(Decrease) in accrued expenses

(421,848

)

(71,034

)

Increase in current liabilities

42,160

50,139

Net cash provided by operating activities

1,181,199

253,517

Cash flows from investing activities:

Purchases of equipment

(37,863

)

(75,363

)

Net cash used in investing activities

(37,863

)

(75,363

)

Cash flows from financing activities:

Principal payments on capital lease obligations

(1,254

)

(23,346

)

Proceeds from exercise of stock options

700,673

—  

Repayment of 10% convertible subordinated note payable

—  

(3,400,000

)

Net cash provided by (used in) financing activities

699,419

(3,423,346

)

Net increase (decrease) in cash and cash equivalents

1,842,755

(3,245,192

)

Cash and equivalents, beginning of period

11,000,561

9,755,032

Cash and equivalents, end of period

$

12,843,316

$

6,509,840

Supplemental disclosures of cash flow information:

Cash paid during the period for interest

$

—  

$

1,111