16
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______to ______
Commission File Number: 0-27734
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Individual, Inc_____________________________________________
- ----------------
(Exact name of registrant as specified in its charter)
Delaware
- --------
(State or other jurisdiction of incorporation or organization)
04-303-6959
- -------------
(I.R.S. Employer Identification No.)
8 New England Executive Park West, Burlington, MA 01803
- -------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(617) 273-6000
- ---------------
(Registrant's telephone number, including area code)
_________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
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.
__X__Yes ___No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of March 31, 1997, 14,638,072 shares of Common Stock, $.01 par value per
share, were outstanding.
<PAGE>
Individual, Inc.
Form 10-Q
For the Quarter Ended March 31, 1997
Index
<TABLE>
<CAPTION>
Page #
- --------
<S> <C> <C>
Facing Sheet 1
Index 2
PART I - UNAUDITED FINANCIAL INFORMATION
- ----------------------------------------------------------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets March 31, 1997 (unaudited) and December 31, 1996 3
Consolidated Statements of Operations (unaudited) 4
Consolidated Statements of Cash Flows (unaudited) 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION
- ----------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index 16
Exhibit 11 Computation of Loss Per Share 17
Financial Data Schedule 18
<PAGE>
</TABLE>
Individual, INC.
Consolidated BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 19,812,309 $ 21,886,219
Investments in marketable securities 9,151,199 8,448,306
Accounts receivable, net 7,454,227 11,088,046
Prepaid expenses 632,102 456,823
------------- --------------
Total current assets 37,049,837 41,879,394
Property and equipment, net 4,123,554 4,102,709
Other assets, net 302,204 947,213
------------- --------------
Total assets $ 41,475,595 $ 46,929,316
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,907,800 $ 4,718,695
Accrued royalties 1,886,608 1,610,829
Accrued expenses 5,258,155 3,821,505
Deferred revenue 12,071,483 13,706,132
Equipment financing loans and notes payable 1,073,963 1,074,055
------------- --------------
Total current liabilities 23,198,009 24,931,216
Other long term liabilities 1,996,017 1,410,625
Stockholders' equity:
Common stock, $0.01 par value; 25,000,000 shares
authorized, 14,638,072 and 14,413,988 shares
issued and outstanding in 1997 and issued in
in 1996, respectively 146,381 144,140
Additional paid in capital 90,167,831 89,840,455
Cumulative translation adjustment 51,702 70,149
Unrealized gains on marketable securities 136,336 125,475
Accumulated deficit (74,220,681) (69,562,067)
Less 32,865 shares held in treasury
(at cost) at December 31, 1996 - (30,677)
------------- --------------
Total stockholders' equity 16,281,569 20,587,475
------------- --------------
Total liabilities and stockholders' equity $ 41,475,595 $ 46,929,316
============= ==============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
------
INDIVIDUAL, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months ended
March 31,
1997 1996
------------- -------------
<S> <C> <C>
Revenue $ 7,794,887 $ 5,029,291
Cost of revenue 4,241,915 2,257,506
------------- -------------
Gross margin 3,552,972 2,771,785
Operating expenses:
Sales and marketing 1,886,856 1,060,544
New subscriber acquisition 2,783,058 2,230,703
Product development 1,196,613 838,725
General and administrative 990,424 655,422
Acquisitions and other charges 1,632,289 -
------------- -------------
Total operating expenses 8,489,240 4,785,394
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Loss from operations (4,936,268) (2,013,609)
Interest income and other, net 368,419 241,594
Interest expense (90,765) (738,206)
Net loss ($4,658,614) ($2,510,221)
============= =============
Net loss per common share ($0.32) ($0.25)
============= =============
Weighted average common
shares outstanding 14,583,463 9,844,520
============= =============
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
------
Individual, INC.
Consolidated STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($4,658,614) ($2,510,221)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 689,640 449,252
Loss on disposal of property and equipment 106,196 18,728
Provision for doubtful accounts 27,750 48,632
Changes in operating assets and liabilities:
Decrease in accounts receivable 3,606,069 1,104,010
Increase in prepaid expenses (175,279) (84,578)
Decrease/ (Increase) in other assets 507,290 (2,020)
(Decrease)/ Increase in accounts payable and accrued expenses (98,466) 12,651
Increase in other long term liabilities 166,667 -
(Decrease)/ Increase in deferred revenue (1,634,650) 78,009
------------- -------------
Net cash used in operating activities: (1,463,397) (885,537)
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Cash flows from investing activities:
Additions to property and equipment (670,993) (115,400)
Investments in marketable securities (700,000) (1,954,794)
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Net cash used in investing activities: (1,370,993) (2,070,194)
------------- -------------
Cash flows from financing activities:
Principal repayments under lease obligations (30,592) (41,639)
Increase/ (Decrease) in equipment loan, net 449,226 (159,518)
Proceeds from issuance of common stock, net of related expenses 360,293 29,868,232
Payment on senior subordinated notes - (10,000,000)
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Net cash provided by financing activities 778,927 19,667,075
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Effect of exchange rate on cash (18,447) (7,235)
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Net increase in cash and cash equivalents (2,073,910) 16,704,109
Cash and cash equivalents at the beginning of period 21,886,219 17,517,743
------------- -------------
Cash and cash equivalents at the end of period $ 19,812,309 $ 34,221,852
============= =============
Supplemental cash flow information:
Interest paid $ 36,350 $ 691,665
============= =============
Non cash transactions:
Equipment acquired under capital lease obligation - 3,359
============= =============
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
INDIVIDUAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The unaudited consolidated financial statements of Individual, Inc. (the
"Company") presented herein have been prepared pursuant to the rules of the
Securities and Exchange Commission for quarterly reports on Form 10-Q and do
not include all of the information and note disclosures required by generally
accepted accounting principles. The condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with management's disc ussion and
analysis of financial condition and results of operations, contained in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996. In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the consolidated financial
position, results of operations and cash flows of the Company and its
subsidiaries. Quarterly operating results are not necessarily indicative of
the results which would be expected for the full year.
2. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. Reclassification of Amounts
Certain amounts in the financial statements for the quarter ended March
31, 1996 have been reclassified to conform to the presentation for the quarter
ended March 31, 1997.
4. Per Share Computations
Net loss per common share for 1996 gives effect to the conversion of all
shares of Series B, C, D, E and G Redeemable Preferred Stock and Series A and
F Preferred Stock and does not include the dividends on Redeemable Preferred
Stock as an increase in net loss. Pursuant to the requirements of the
Securities and Exchange Commission, common shares and common equivalent shares
issued at prices below the IPO price of $14.00 per share during the twelve
months immediately preceding the date of the initial filing of the
Registration Statement have been included in the calculation of common shares
and common share equivalents, using the treasury stock method, as if they were
outstanding for all periods prior to the IPO.
5. Acquisitions and Other Charges
All operating expenses of FreeLoader of approximately $1.5 million, which
are predominantly product development expenses, are reflected in acquisitions
and other charges, as well as the amortization of goodwill acquired in the
purchase of the Hoover business of approximately $178,000.
On February 6, 1997, the Company announced that it is planning to sell
FreeLoader or seek a majority investor. In order to maintain the viability
and value of FreeLoader, the Company is maintaining its current level of
investment in the FreeLoader operations as it pursues a sale or outside
investment. No material impact is expected from the sale of FreeLoader, as
the majority of the purchase price has been allocated to purchased incomplete
technology and accordingly, was expensed at the time of the purchase.
However, there can be no assurance that the Company will be successful in
completing such a transaction, which may require the Company to cease
operations of FreeLoader and incur additional expenses related to any
termination of operations.
INDIVIDUAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. Commitments and Contingencies
The Company has been named as a defendant in a putative federal
securities class action lawsuit filed on November 13, 1996 in the United
States District Court for the District of Massachusetts. The lawsuit was
filed on behalf of an alleged class of purchasers of the Company's common
stock during the period from March 15, 1996 through July 24, 1996. The
complaint filed in the lawsuit also names as
defendants, among others, certain of the Company's current and former
directors and officers, including Joseph A. Amram, the Company's former Chief
Executive Officer, as well as the three co-managing underwriters of the
Company's IPO.
The complaint alleges, among other things, that the defendants made
misstatements, or failed to make statements, to the investing public in the
IPO Prospectus, Registration Statement, as well as in subsequent public
disclosures, relating to the alleged existence of disputes between Joseph A.
Amram and the Company. The plaintiffs seek damages, including costs and
expenses, in an unspecified amount, among other relief. The Company believes
that the allegations contained in the complaint are without merit and intends
to defend vigorously against all such claims. The ultimate claims payable
under these actions, if any, are neither probable nor estimable.
7. Recently Issued Accounting Standard
The Financial Accounting Standards Board issued Statement No. 128 ("SFAS
128"), "Earnings per Share", which modifies the way in which earnings per
share (EPS) is calculated and disclosed. Upon adoption of this standard for
the fiscal period ending December 31, 1997, the Company will disclose basic
and diluted EPS and will restate all prior period EPS data presented. Basic
EPS excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for
the period. Diluted EPS, similar to fully diluted EPS, reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the
isssuance of common stock that then shared in the earnings of the entity.
Management believes the adoption of SFAS 128 will not have a material impact
on reported earnings per share.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Individual offers a suite of customized information services that provide
knowledge workers with relevant current awareness reports each day while
offering information providers and advertisers new ways to reach targeted
audiences. The Company commenced delivery of its initial service in early
1990, and has subsequently introduced additional services targeted at multiple
market segments.
The Company's revenue is derived from two classes of services: enterprise
services and single-user services. Revenue for the Company's principal
enterprise service, First! (introduced in the first quarter of 1990) consists
of subscription fees from organizations. In addition, in October 1996, the
Company acquired the Hoover business intelligence unit ("Hoover"), from the
Information Access Company ("IAC"), a unit of the Thompson Corporation.
Revenue from the enterprise Hoover service consists of both subscription fees
for content, and software license and maintenance fees. The Company's
principal single-user service is the World Wide Web-based service NewsPage,
introduced in the second quarter of 1995. NewsPage base service is generally
available for no charge to users. Revenue consists of advertising fees from
companies placing advertisements through this service and from subscription
fees for premium levels of service and fees for the fulfillment of certain
user requests for additional information. Another single-user service of the
Company is HeadsUp, which was introduced in the second quarter of 1993.
HeadsUp consists of subscription fees and fees for the fulfillment of certain
user requests for additional information. HeadsUp is a fax and email-based
service and is not being promoted actively in 1997, primarily due to the
Company's belief that users are moving to Web-based information services, such
as NewsPage.
The Company recognizes subscription revenue ratably over the subscription
period. The Company's subscription contracts are typically billed in advance,
and amounts attributable to services not yet delivered are recorded in
deferred revenue. Customers of the Company's services may, under certain
circumstances, terminate their subscriptions at any time and receive a credit
in the form of a cash refund for the unused portion. Historically, the level
of subscription cancellations prior to the termination of the subscription
period has not been material and has had no impact on revenue previously
recognized. Fulfillment fees are recognized as revenue at the time stories
are provided. Advertising revenue is recognized ratably over the
advertisement period.
The majority of the Company's operating expenses consists of salaries and
related costs. The Company had 220 full-time employees on March 31,1997 up
from 214 on December 31, 1996, and up from 157 and 96 on December 31, 1995 and
1994, respectively. The number on March 31, 1997 includes 38 employees
working at Freeloader. The Company incurs significant expenses to acquire new
customers, reported as new subscriber acquisition expenses. The Company may
also incur expenses in the process of soliciting a subscription renewal, which
are included in sales and marketing expenses. The cost of soliciting
subscription renewals is substantially less than the cost of acquiring new
subscriptions.
General Risk Factors That May Affect Future Quarterly Results
- ---------------------------------------------------------------------
This Form 10-Q contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject
to risks and uncertainties. The Company's actual future results may differ
materially from the results discussed in the forward-looking statements.
Factors that might cause such differences include, but are not limited to,
those discussed in "Factors That May Affect Future Performance" under Item 7
of the Company's Annual Report on Form 10K for the fiscal year ended December
31, 1996 as well as other factors described from time to time in the Company's
filings with the Securities and Exchange Commission.
The market for current awareness products is experiencing rapid changes as
organizations introduce company-wide information and knowledge solutions built
on enterprise computing platforms such as internal intranets and groupware
products, such as Lotus Notes. As a result of these changes, Individual has
migrated its First! product from fax and e-mail distribution, sold primarily
to small groups of users at an average annual contract value of less than
$10,000, to distribution via intranet and Lotus Notes systems capable of
servicing large organizations. This evolving market focus has required the
Company not only to invest in the product development and engineering required
to introduce new and enhanced enterprise-based products such as First!
Intranet and First! Notes, but also to adapt its selling efforts in order to
address the requirements of large organizations that desire to implement
current business awareness solutions on an enterprise-wide basis over their
existing information infrastructures. Such solutions typically involve large
contracts with annual contract values in excess of $50,000 and generally
require a longer sales cycle than departmental or business-group sales. As a
result, the Company believes that it must invest in additional sales and sales
management personnel with experience in selling large contracts, as well as in
additional customer service personnel capable of addressing increasingly
complex customer needs. Approximately 75% of the Company's enterprise customer
base presently distributes the Company's products from intranets and Lotus
Notes, almost double from a year ago. Notwithstanding such growth, however,
the ability of the Company to achieve future growth is heavily dependent on
the Company's ability to successfully continue to sell large contracts to
enterprise customers and to support implementations with those customers.
There can be no assurance that the Company will be successful in recruiting
and training additional sales and customer service personnel with the skills
required to sell and support large contracts, or that the sales cycles will
not extend beyond the periods currently experienced by the Company. If the
Company fails to successfully recruit and train such personnel, or if the
Company experiences longer sales cycles, its rate of growth and future
operating results may be adversely affected.
On June 28, 1996, the Company acquired FreeLoader, a developer of agent-based
software for the off-line delivery of World Wide Web multi-media content. On
February 6, 1997, the Company announced that it is planning to sell FreeLoader
or seek a majority investor. This decision was based on the rapid changes in
the market for Web broadcasting which have occurred since the closing of the
FreeLoader acquisition, including the significant increase in the number of
vendors offering products based on "push" technologies and the desire for the
Company to offer its services on a wide range of Web broadcasting platforms,
as well as the future need to invest heavily in FreeLoader in order to
maintain the competitiveness of its product offerings. In order to maintain
the viability and value of FreeLoader, the Company is maintaining its current
level of investment in the FreeLoader operations as it pursues a sale or
outside investment. No material impact is expected from the sale of
FreeLoader, as the majority of the purchase price has been allocated to
purchased incomplete technology and accordingly, was expensed at the time of
the purchase. However, there can be no assurance that the Company will be
successful in completing such a transaction, which may require the Company to
cease operations of FreeLoader and incur additional expenses related to any
termination of operations.
Management may in future periods consider other acquisitions that it believes
may enable Individual to acquire complementary skills and capabilities, offer
new products and services, expand its customer base, or obtain other
competitive advantages. Such acquisitions involve potential risks, including
difficulties in assimilating the acquired Company's operations, technology,
products and personnel, completing and integrating acquired in-process
technology, diverting management's resources, uncertainties associated with
operating in new markets and working with new employees and customers, and the
potential loss of the acquired Company's key employees.
The Company depends, in significant part, upon the continued services of its
key technical, editorial, sales and product development, most of whom are not
bound by employment agreements, and only certain of whom are bound by
noncompetition agreements. The Company's plan requires the hiring of
additional engineering and sales personnel in order to add additional products
and features and grow its customer base. In the Boston market, these skills
are in high demand and there is no assurance that the Company will be
successful in hiring these personnel.
In view of the Company's revenue growth in recent years and its limited
operating history, period-to-period comparisons of its financial results are
not necessarily meaningful and should not be relied upon as any indication of
future performance. The Company's quarterly results of operations have
fluctuated significantly in the past and will likely fluctuate in the future
due to, among other factors, demand for its services and changes in service
mix, the size and timing of new and renewal subscriptions from corporate
customers, advertising revenue levels, the effect of new service announcements
by the Company and its competitors, the ability of the Company to develop,
market and introduce new and enhanced versions of its services on a timely
basis and the level of product and price competition. A substantial portion of
the Company's cost of revenue, which consists principally of fees payable to
information providers , telecommunication costs and personnel expenses, is
relatively fixed in nature. The Company's operating expense levels are based,
in significant part, on the Company's expectations of future revenue. If
quarterly revenues are below management's expectations, both gross margins and
results of operations would be adversely affected because a relatively small
amount of the Company's costs and expenses varies with its revenue in the
short-term.
<PAGE>
- ------
Results of Operations
- -----------------------
The following table sets forth, for the periods indicated, certain financial
data as a percentage of total revenue:
<TABLE>
<CAPTION>
Three months ended March 31,
1997 1996
<S> <C> <C>
Revenue 100% 100%
Cost of Revenue 54% 45%
------- -------
Gross Margin 46% 55%
Operating expenses:
Sales and marketing 24% 21%
New subscriber acquisition 36% 44%
Product development 15% 17%
General and administrative 13% 13%
Acquisitions and other charges 21% -
------- -------
Total operating expense 109% 95%
Loss from operations (63)% (40)%
Interest and other income (expense), net 3% (10)%
------- -------
Net loss (60)% (50)%
======== =====
</TABLE>
Three months ended March 31, 1997 and 1996
- -------------------------------------------------
Revenue.
Revenue increased 55% from $5,029,000 for the three months ended March 31,
1996 to $7,795,000 for the three months ended March 31, 1996. Additionally,
the number of registered and authorized users of the Company's information
services increased to more than 558,000 at March 31, 1996, or 300% over the
number of users at March 31, 1996.
In the first quarter of fiscal 1997, revenue from enterprise services was
$5,374,000, up from $3,465,000 for the same period in 1996. This increase of
55% in revenue from enterprise services resulted primarily from new sales of
enterprise solutions, primarily First! Intranet and First! Notes, which is
offsetting declining revenues from First! distributed by fax and e-mail.
Revenue from Hoover, acquired in October 1996, also contributed to the
increase.
In the first quarter of fiscal 1997, revenue from single user services also
grew by 55% to $2,421,000, up from $1,565,000 for the same period in 1996.
The growth was attributable primarily to the Company's NewsPage service on the
World Wide Web. The increase in revenue from NewsPage was partially offset by
the declining revenues of the non-Web single user service HeadsUp, which has
not been actively promoted. The Company expects this trend to continue in the
future.
Cost of revenue.
Cost of revenue was $4,242,000 for the three months ended March 31, 1997, as
compared to $2,258,000 for the same period in 1996, or an increase of 88%.
The increase was the result of additional costs attributable to the increased
revenue. Gross margin decreased from 55% to 46%. The decline in gross margin
is the result of higher information provider costs, including minimum
royalties paid to certain information provider and the higher royalty
percentage paid on NewsPage and Hoover revenue as compared to revenue from
First! Further, the Company incurred additional costs from adding capacity
for NewsPage and customer support costs required to support the larger
customer base.
Sales and marketing.
Sales and marketing expenses increased 78% to $1,887,000 for the three months
ended March 31, 1997, up from $1,061,000 for the same period of 1996. This
increase was primarily due to additional personnel and consulting services in
marketing, product management and advertising sales for NewsPage.
Additionally, due to the larger customer base there was an increase in
expenses related to renewing First! contracts.
New subscriber acquisition.
New subscriber acquisition expenses increased 25% to $2,783,000 for the three
months ended March 31, 1997 from $2,231,000 for the same period in 1996. The
increase in new subscriber acquisition expenses in the first quarter of 1997
was the result of additional sales personnel selling First! and expenses to
acquire NewsPage users, primarily Web site advertising and commissions paid to
NewsPage distribution partners. The Company plans to add additional direct
sales personnel and to continue its expenditures in promoting NewsPage at the
current or higher levels if it determines that the promotional activities
continue to generate increases in NewsPage users.
Product development.
Product development increased 43% to $1,197,000 for the three months ended
March 31, 1997, up from $839,000 for the same period in 1996. This increase
was primarily the result of development expenses related to the continued
development of new enhancements for both the NewsPage and enterprise services.
The Company had anticipated a higher level of expenditures in the quarter but
due to challenges in recruiting qualified engineers in the Boston market,
engineers were not added as quickly as the Company had planned. The Company
intends to add additional engineers throughout 1997.
General and administrative.
General and administrative expenses increased 51% to $990,000 for the three
months ended March 31, 1997, up from $655,000 for the same period of 1996. The
reasons for this increase included the hiring of additional management and
administrative personnel and other expenses related to the requirements of a
public company.
Acquisitions and other charges.
Acquisitions and related charges were $1,632,000 for the quarter ended March
31, 1997. These charges primarily include development expenses related to
Freeloader, acquired in June 1996. As described above, the Company announced
in February 1997 that it is planning to sell FreeLoader or seek a majority
investor.
Interest income and other, net.
Interest income and other, net increased 52% to $368,000 for the three months
ended March 31, 1997, up from $242,000 for the same period of 1996, primarily
from interest earned on the net proceeds of the March 1996 IPO.
Interest expense.
Interest expense decreased to $91,000 for the three months ended March 31,
1997, down from $738,000 for the same period of 1996. The decrease was due to
the interest charges on senior subordinated notes incurred in the first
quarter of 1996. The senior subordinated notes were paid in full in March
1996 from a portion of the proceeds of the IPO.
Liquidity and Capital Resources
- ----------------------------------
The Company's cash, cash equivalents and marketable securities balance at
March 31, 1997 was $28,964,000, as compared to $30,335,000 at December 31,
1996. Net cash used in operations was ($1,463,000) for the three months ended
March 31, 1997, as compared with ($886,000) for the same period in 1996. The
change was mainly attributable to the increased operating expenses in the
three month period ended March 31, 1997. The first quarter, due to the higher
level of billings in the fourth quarter which are substantially collected in
the first quarter, tends to have a lower cash usage than other quarters. The
Company expects that its use of cash from operations in future quarters will
be greater than levels experienced in the first quarter. Net cash used in
investing activities was ($1,371,000) in the three months ended March 31, 1997
as compared with ($2,070,000) for the same period of 1996. In the first
quarter of 1997, $700,000 was used to purchase marketable securities,
primarily from U.S. government agencies, down from $1,955,000 used during the
same period a year ago. Net cash provided by financing activities was
$779,000 for the three months ended March 31 1997, as compared to $19,667,000
in the same period of 1996. This decrease resulted primarily from the
completion of the Company's IPO in March of 1996.
The Company has also used equipment leases and debt instruments to finance the
majority of its purchases of capital equipment. At March 31, 1997, the
Company had approximately $1,074,000 outstanding in connection with these
obligations and had an additional $1,516,000 available under established
credit arrangements. In addition, the Company has a revolving line of credit
with a commercial bank providing for a maximum credit of $3,500,000 subject to
certain covenants. At March 31, 1997, no amounts were outstanding under this
line.
Management believes that cash and marketable securities and cash flow from
operations will be sufficient to fund its operations at least for the next
twelve months. This may depend on numerous factors, including the rate of
expansion for current products and services, the development of new products
and services, and potential acquisitions or strategic investments.
Recently Issued Accounting Standard
- --------------------------------------
The Financial Accounting Standards Board issued Statement No. 128 ("SFAS
128"), "Earnings per Share", which modifies the way in which earnings per
share (EPS) is calculated and disclosed. Upon adoption of this standard for
the fiscal period ending December 31, 1997, the Company will disclose basic
and diluted EPS and will restate all prior period EPS data presented. Basic
EPS excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for
the period. Diluted EPS, similar to fully diluted EPS, reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the
isssuance of common stock that then shared in the earnings of the entity.
Management believes the adoption of SFAS 128 will not have a material impact
on reported earnings per share.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- -------- -------------------------------------
(a) Exhibits
11 Computation of Weighted Average Shares Used in Computing Loss Per
Share Amounts
Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 1997.
<PAGE>
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.
Individual, Inc.
Date: May 13, 1997
By: /s/Michael Kolowich
--------------------
Michael Kolowich
Chariman of the Board, President,
Chief Executive Officer and Director
(Principal Executive Officer)
By: /s/Robert L. Lentz
--------------------
Robert L. Lentz
Senior Vice President, Finance and
Administration, Chief Financial Officer,
Treasurer and Secretary
(Principal Financial Officer and Principal
Accounting Officer)
<PAGE>
EXHIBIT INDEX INDIVIDUAL, INC.
<TABLE>
<CAPTION>
Exhibit Number Description Page
- -------------- -------------------------------------------- ----
<C> <S> <C>
11 Computation of Weighted Average Shares 17
Used in Computing Loss Per Share Amounts
Financial Data Schedule 18
</TABLE>
17
<TABLE>
<CAPTION>
Exhibit 11
INDIVIDUAL, INC.
COMPUTATION OF WEIGHTED AVERAGE SHARES
USED IN COMPUTING LOSS PER SHARE AMOUNTS
Primary Fully Diluted Supplemental
Type of Security Shares Shares Shares (1)
- ------------------------------------------------------------------ ----------- -------------- -------------
<S> <C> <C> <C>
FOR THE THREE MONTHS ENDED MARCH 31, 1996:
Common stock less shares held in treasury, beginning of period 1,713,096 1,713,096 1,713,096
Weighted average common stock issued during the period 506,690 506,690 506,690
Weighted average treasury stock repurchased during the period (476) (476) (476)
Conversion of preferred stock and redeemable preferred stock
into common stock (1) 921,729 921,729 7,625,210
----------- -------------- -------------
Weighted average shares of common stock outstanding 3,141,039 3,141,039 9,844,520
=========== ============== =============
Net loss per common share ($0.95) ($0.95) ($0.25)
=========== ============== =============
FOR THE THREE MONTHS ENDED MARCH 31, 1997:
Common stock less shares held in treasury, beginning of period 14,413,988 14,413,988 14,413,988
Weighted average common stock issued during the period 169,475 169,475 169,475
Weighted average shares of common stock outstanding 14,583,463 14,583,463 14,583,463
=========== ============== =============
Net loss per common share ($0.32) ($0.32) ($0.32)
=========== ============== =============
<FN>
(1) Upon completion of the public offering on March 20, 1996, the redeemable preferred stock
and preferred stock converted to 7,625,210 shares of common stock. Accordingly, the supplemental
earnings per share calculation has assumed the conversion of all shares of redeemable preferred stock
and preferred stock, effected for the 3-for-2 split, at the beginning of each period presented.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AT DECEMBER 28, 1996, AND CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 28,1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 19,812
<SECURITIES> 9,151
<RECEIVABLES> 7,454
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37,050
<PP&E> 4,124
<DEPRECIATION> 0
<TOTAL-ASSETS> 41,476
<CURRENT-LIABILITIES> 23,198
<BONDS> 0
<COMMON> 146
0
0
<OTHER-SE> 16,135
<TOTAL-LIABILITY-AND-EQUITY> 41,476
<SALES> 0
<TOTAL-REVENUES> 7,795
<CGS> 4,242
<TOTAL-COSTS> 8,489
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 91
<INCOME-PRETAX> (4,659)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,659)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,659)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)
</TABLE>
