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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

 
(Mark One)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the quarterly period ended March 31, 2005
 
OR
   
 
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the transition period from            to           
   
  Commission file number: 0-30428
   
  FindWhat.com, Inc.
  (Exact name of registrant as specified in its charter)
Delaware
88-0348835
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
   
  5220 Summerlin Commons Boulevard, Suite 500, Fort Myers, Florida 33907
  (Address of principal executive offices, including zip code)
   
  (239) 561-7229
  (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 the filing requirements for at least the past 90 days. Yes     No
   
  Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes      No
   
  Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 30,697,423 shares of Common Stock, $.001 par value, were outstanding at April 29, 2005.

 

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FORM 10-Q

FindWhat.com, Inc.

Table of Contents

    Page No.
   
     
PART I.    FINANCIAL INFORMATION  
     
     
3
     
4
     
Unaudited Condensed Statements of Stockholders’ Equity 5
     
Unaudited Condensed Consolidated Statements of Cash Flows 6
     
Notes to Unaudited Interim Condensed Consolidated 7
Financial Statements for the Three Months Ended
March 31, 2005 and 2004
     
16
     
43
     
43
     
PART II.    OTHER INFORMATION
   
46
     
47
     
 		  

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Part I. Financial Information

Item 1. Financial Statements

FindWhat.com, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par values)

           
March 31,
December 31,
     
ASSETS
   
2005
2004
         
 
 
           
(unaudited)
 
CURRENT ASSETS              
  Cash and cash equivalents   $ 32,703   $ 29,220  
  Short-term investments     17,096     25,004  
                     
 
Accounts receivable, less allowance for doubtful accounts of $2,824 and $3,095 at March 31, 2005 and December 31, 2004, respectively
    26,903     26,117  
  Deferred tax assets     2,417     2,510  
  Prepaid expenses and other current assets     3,813     3,181  
         
 
 
                     
    Total current assets     82,932     86,032  
                     
PROPERTY AND EQUIPMENT – NET     18,247     16,755  
INTANGIBLE ASSETS              
  Goodwill       197,357     201,183  
  Vendor agreements, net     17,487     18,736  
  Other intangible assets, net     14,598     15,567  
DEFERRED TAX ASSETS, NET OF VALUATION ALLOWANCE     823     1,964  
LONG-TERM DEPOSITS     1,633     614  
OTHER ASSETS       132     353  
         
 
 
                     
    Total assets   $ 333,209   $ 341,204  
         
 
 
                     
LIABILITIES AND STOCKHOLDERS’ EQUITY
             
                     
CURRENT LIABILITIES              
  Accounts payable and accrued expenses   $ 32,284   $ 33,421  
  Deferred revenue     4,323     5,798  
  Current portion of long-term debt     365     3,941  
  Other current liabilities     799     760  
         
 
 
                     
    Total current liabilities     37,771     43,920  
                     
DEFERRED TAX LIABILITIES     5,412     5,855  
LONG-TERM DEBT AND OTHER LONG-TERM LIABILITIES     3,310     3,750  
         
 
 
                     
  Total liabilities     46,493     53,525  
         
 
 
                     
COMMITMENTS AND CONTINGENCIES              
                     
STOCKHOLDERS’ EQUITY              
  Preferred stock, $.001 par value; authorized, 500 shares; none issued and outstanding     —     —  
 
Common stock, $.001 par value; authorized, 200,000 shares; issued 30,715 and 30,502, respectively; outstanding 30,672 and 30,459, respectively
    31     31  
  Additional paid-in capital     248,205     247,132  
  Treasury stock; 43 shares at cost     (804 )   (804 )
  Accumulated other comprehensive income     7,571     12,808  
  Retained earnings     31,713     28,512  
         
 
 
                     
    Total stockholders’ equity     286,716     287,679  
         
 
 
                     
    Total liabilities and stockholders’ equity   $ 333,209   $ 341,204  
         
 
 

See notes to unaudited condensed consolidated financial statements.

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FindWhat.com, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)

         
         
For the Three Months
Ended March 31,
         
2005
2004
       
 
 
             
Revenues   $ 58,188   $ 24,686  
       
 
 
Operating expenses            
  Search serving   2,948     844  
  Marketing, sales and service   36,185     13,540  
  General and administrative   9,903     3,459  
  Product development   1,993     600  
  Amortization     1,975     189  
       
 
 
                   
Total operating expenses   53,004     18,632  
       
   
 
                   
Income from operations   5,184     6,054  
Interest income, net   101     180  
Exchange rate loss   (62 )   —  
       
 
 
                   
Income before provision for income taxes   5,223     6,234  
                   
Income tax expense   2,022     2,432  
       
 
 
                   
Net income   $ 3,201   $ 3,802  
       
 
 
                   
Net income per share            
    Basic   $ 0.10   $ 0.17  
       
 
 
    Diluted   $ 0.10   $ 0.16  
 
 
 
  Weighted-average number of common shares outstanding            
    Basic     30,613     21,899  
       
 
 
    Diluted     32,367     24,053  
       
 
 

See notes to unaudited condensed consolidated financial statements.

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FindWhat.com, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(Unaudited)

     
For the Three Months
Ended March 31,
     
2005
2004
     
Common stock              
    Balance, beginning of period   $ 31   $ 21  
    Issuance of common stock in connection with business acquisitions     —     1  
    Common stock issued related to stock option and warrant exercises     —     1  
     
    Balance, end of period     31     23  
     
                   
Additional paid-in-capital              
    Balance, beginning of period     247,132     52,884  
    Issuance of common stock in connection with business acquisitions     —     18,563  
    Common stock issued related to stock option and warrant exercises     937     938  
    Common stock issued related to Tax benefit of exercise of stock options     136     —  
     
    Balance, end of period     248,205     72,385  
     
                   
Treasury stock              
     
    Balance, beginning and end of period     (804 )   (82 )
     
                   
Retained earnings              
    Balance, beginning of period     28,512     11,484  
    Net income     3,201     3,802  
     
    Balance, end of period     31,713     15,286  
     
                   
Accumulated other comprehensive income              
    Balance, beginning of period     12,808     —  
    Foreign currency translation adjustment     (5,237 )   —  
     
    Balance, end of period     7,571     —  
     
                   
    Stockholders’ Equity   $ 286,716   $ 87,612  
       
 
 
                   
Comprehensive income (loss)              
    Net income   $ 3,201   $ 3,802  
   
Other comprehensive income
Foreign currency translation adjustment
    (5,237 )   —  
    Comprehensive income (loss)   $ (2,036 ) $ 3,802  
       
 
 
                   
       
Number of Shares 
  
       
 
Common stock              
    Balance, beginning of period     30,502     21,428  
    Issuance of common stock in connection with business acquisitions     —     1,001  
    Common stock issued related to stock option and warrant exercises     213     419  
       
 
 
    Balance, end of period     30,715     22,848  
       
 
 

See notes to unaudited condensed consolidated financial statements.

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FindWhat.com, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

                   
For the Three Months
Ended March 31,
                   
2005
2004
   
 
 
Cash Flows from Operating Activities              
      Net income   $ 3,201   $ 3,802  
      Adjustments to reconcile net income to net cash              
            provided by operating activities              
                  Provision for (recoveries of) doubtful accounts     (43 )   77  
                  Depreciation and amortization     3,208     780  
                  Tax benefit of stock option exercises     136     —  
                  Deferred income tax expense     2,172     —  
                  Loss on sale of assets     50     —  
                  Changes in operating assets and liabilities        
                  Accounts receivable     (1,351 )   (932 )
                  Prepaid expenses and other current assets     3     (586 )
                  Income taxes receivable     (667 )   —  
                  Other assets     (818 )   (15 )
                  Deferred revenue     (1,356 )   139  
                  Accounts payable, accrued expenses and other liabilities     (1,372 )   343  
                     
 
 
                                 
      Net Cash Provided by Operating Activities     3,163     3,608  
                     
 
 
                                 
Cash Flows from Investing Activities              
      Purchase of short-term investments     (17,217 )   (13,217 )
      Proceeds from short-term investments     25,125     35,910  
      Purchase of businesses, net of cash acquired     (1,499 )   (6,464 )
      Purchase of equipment and furniture     (2,852 )   (1,153 )
                     
 
 
                                 
      Net Cash Provided by Investing Activities     3,557     15,076  
                     
 
 
                                 
Cash Flows from Financing Activities              
      Payments made on capital leases and notes payable     (341 )   (959 )
      Payments made on software license obligation     (3,500 )   —  
      Proceeds received from exercise of stock options and warrants     937     939  
                     
 
 
                                 
      Net Cash Used in Financing Activities     (2,904 )   (20 )