<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
----- Exchange Act of 1934
For the quarter ended: June 30, 1996 or
Transition report pursuant to Section 13 or 15(d) of the Securities
----- Exchange Act of 1934
Commission file number: 0-27680
-------
INTELLIQUEST INFORMATION GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 74-2775377
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1250 Capital of Texas Highway
Austin, Texas 78746
(512) 329-0808
(Address and Telephone Number of Principal Executive Offices)
_________________________
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 X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 30, 1996
Common Stock, $.0001 par value 6,997,719
1
<PAGE>
INTELLIQUEST INFORMATION GROUP, INC.
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet
June 30, 1996 (unaudited) and December 31, 1995 3
Condensed Consolidated Statement of Operations (unaudited)
Three months ended June 30, 1996 and 1995 4
Condensed Consolidated Statement of Operations (unaudited)
Six months ended June 30, 1996 and 1995 5
Condensed Consolidated Statement of Cash Flows (unaudited)
Six months ended June 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
<PAGE>
Part I. Financial Information
- -------------------------------
Item 1. Condensed Consolidated Financial Statements
INTELLIQUEST INFORMATION GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- -------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and equivalents.............................................. $26,391 $ 1,688
Accounts receivable, net.......................................... 3,687 2,990
Unbilled revenues................................................. 1,151 1,599
Projects in process............................................... 1,862 71
Prepaid expenses and other assets................................. 263 32
------- -------
Total current assets........................................... 33,354 6,380
Furniture and equipment, net...................................... 2,021 1,537
Other assets...................................................... 145 89
------- -------
Total assets................................................... $35,520 $ 8,006
======= =======
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable.................................................. $ 1,536 $ 1,174
Accrued liabilities............................................... 1,043 1,263
Deferred revenues................................................. 2,987 1,822
Other current liabilities......................................... 168 103
------- -------
Total current liabilities...................................... 5,734 4,362
Obligations under capital leases and
deferred rent...................................................... 138 170
------- -------
Total liabilities.............................................. 5,872 4,532
------- -------
Redeemable convertible preferred stock.............................. 0 4,420
------- -------
Common Stockholders' Equity (Deficit):
Common stock, $.0001 par value, 30,000,000
shares authorized, no shares issued and
outstanding at December 31, 1995, 6,997,719
at June 30, 1996................................................ 1 0
Series A common stock, $.01 par value,
20,000,000 shares authorized,
3,245,193 shares issued and outstanding
at December 31, 1995, no shares authorized
or outstanding at June 30, 1996................................ 0 32
Series B common stock, $.01 par value,
344,256 shares authorized, no shares issued
or outstanding at December 31, 1995,
no shares authorized, issued or outstanding
at June 30, 1996................................................ 0 0
Capital in excess of par value.................................... 32,613 2,314
Deferred compensation............................................. (54) (61)
Foreign currency translation...................................... 1 0
Accumulated deficit............................................... (2,913) (3,231)
------- -------
Total common stockholders' equity (deficit).................... 29,648 (946)
------- -------
Total liabilities, redeemable convertible preferred stock and
common stockholders' equity (deficit).......................... $35,520 $ 8,006
======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
3
<PAGE>
INTELLIQUEST INFORMATION GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
<S> <C> <C>
Revenues:
Renewable subscription-based products.... $1,573 $1,427
Renewable proprietary products........... 1.922 1,490
Proprietary project research............. 1,172 707
------ ------
Total revenues........................... 4,667 3,624
Operating expenses:
Cost of revenues......................... 1,863 1,673
Sales, general and administrative........ 1,430 1,312
Product development...................... 1,085 454
Depreciation and amortization............ 170 80
------ ------
Total operating expenses................. 4,548 3,519
------ ------
Operating income............................ 119 105
Interest income (expense), net.............. 234 4
------ ------
Income before income taxes.................. 353 109
Provision for income taxes.................. 74 89
------ ------
Net income.................................. $ 279 $ 20
====== ======
Net income per share........................ $.04 $.00
Weighted average shares outstanding......... 7,240 5,512
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
4
<PAGE>
INTELLIQUEST INFORMATION GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
<S> <C> <C>
Revenues:
Renewable subscription-based products... $3,234 $2,216
Renewable proprietary products.......... 3,915 3,150
Proprietary project research............ 1,617 1,653
------ ------
Total revenues.......................... 8,766 7,019
Operating expenses:
Cost of revenues........................ 3,685 3,267
Sales, general and administrative....... 2,792 2,589
Product development..................... 1,693 838
Depreciation and amortization........... 317 141
------ ------
Total operating expenses................ 8,487 6,835
------ ------
Operating income........................... 279 184
Interest income (expense), net............. 254 3
------ ------
Income before income taxes................. 533 187
Provision for income taxes................. 152 141
------ ------
Net income................................. $ 381 $ 46
====== ======
Net income per share....................... $.06 $.01
Weighted average shares outstanding........ 6,482 5,512
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
5
<PAGE>
INTELLIQUEST INFORMATION GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1996 JUNE 30, 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................................. $ 381 $ 46
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization........................................ 352 157
Bad debt expense..................................................... 60 99
Deferred compensation................................................ 7 98
Net changes in assets and liabilities:
Accounts receivable and unbilled revenues............................ (309) (1,449)
Prepaid expenses and other assets.................................... (88) (24)
Projects in process.................................................. (1,791) (1,390)
Accounts payable and accrued expenses................................ 142 773
Deferred revenues.................................................... 1,165 2,187
Deferred rent and other.............................................. (114) 161
------- -------
Net cash provided by (used in) operating activities..................... (195) 658
------- -------
Cash flows from investing activities:
Net repayment on notes receivable...................................... (111) 87
Purchases of equipment and leasehold improvements...................... (789) (338)
------- -------
Net cash used in investing activities............................. (900) (251)
------- -------
Cash flows from financing activities:
Proceeds from sale of stock............................................ 25,786 625
Purchase of Treasury stock............................................. (73)
Net borrowing on note payable.......................................... 46 59
Repayments of principal on capital lease obligations................... (34) (23)
------- -------
Net cash provided by financing activities......................... 25,798 588
------- -------
Net increase in cash and equivalents................................... 24,703 995
Cash and equivalents at the beginning of the period.................... 1,688 1,283
------- -------
Cash and equivalents at the end of the period.......................... $26,391 $ 2,278
------- -------
Supplemental cash flow disclosures:
Interest paid.......................................................... 9 13
Property and equipment acquired under capital leases................... 0 0
Taxes paid............................................................. 391 27
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
6
<PAGE>
INTELLIQUEST INFORMATION GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL AND BASIS OF FINANCIAL STATEMENTS
The accompanying unaudited financial statements include the accounts of
IntelliQuest Information Group, Inc., a Delaware corporation, and its
consolidated subsidiaries (collectively, the "Company" or "IntelliQuest").
The Company provides international quantitative market information to high
technology companies.
In March 1996, the Company completed an initial public offering in which the
Company sold 1,635,000 shares of its common stock for net proceeds to the
Company of $25.8 million. Upon closing of the initial public offering, each
outstanding share of the Company's Series A Redeemable Convertible Preferred
Stock and Series B Redeemable Convertible Preferred Stock was automatically
converted into one share of common stock of the Company and outstanding
warrants were exercised to purchase common stock of the Company resulting in
the issuance of 2,117,526 shares of common stock.
In May 1996, the Company acquired Pipeline Communications, Inc.
("Pipeline"), a privately held company. See Note 2.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission and, accordingly, do not include all information and
notes required under generally accepted accounting principles for complete
financial statements. In the opinion of management, the accompanying
unaudited interim consolidated financial statements contain all adjustments
consisting of a normal recurring nature necessary for a fair presentation of
the financial position of the Company as of June 30, 1996 and the results of
the Company's operations and its cash flows for the six-month periods ended
June 30, 1996 and 1995. This report on Form 10-Q should be read in
conjunction with the Company's audited financial statements for the year
ended December 31, 1995 and notes included therein. The results of
operations for interim periods are not necessarily indicative of the results
of operations to be expected for the year.
2. ACQUISITIONS
In May 1996, IntelliQuest completed a merger with Pipeline Communications,
Inc. ("Pipeline") in which Pipeline became a wholly-owned subsidiary of
IntelliQuest. Shares of IntelliQuest common stock totaling 562,500 were
exchanged for all outstanding shares of common stock, stock options, and
warrants of Pipeline. The transaction was accounted for as a pooling of
interests and therefore, all prior period financial statements have been
restated as if the acquisition took place at the beginning of such periods.
7
<PAGE>
INTELLIQUEST INFORMATION GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Separate results of operations for the periods prior to the acquisition with
Pipeline are as follows (in thousands):
<TABLE>
<CAPTION>
For the Year For the Year For the Six For the Six
------------ ------------ ----------- -----------
Ended Ended Months Ended Months Ended
----- ----- ------------ ------------
December 31, December 31, June 30, 1996 June 30, 1995
------------ ------------ ------------- -------------
1994 1995 (Unaudited) (Unaudited)
---- ---- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
IntelliQuest............. $12,983 $16,974 $ 7,209 $ 5,999
Pipeline................. 1,006 2,140 1,557 1,020
------- ------- ------- -------
Combined.................... $13,989 $19,114 $ 8,766 $ 7,019
Net Income (loss)
IntelliQuest............. $ (24) $ 911 $ 404 $ 212
Pipeline................. (265) (346) (83) (166)
------- ------- ------- -------
Combined................... $ (289) $ 565 $ 381 $ 46
Other changes in
stockholders' equity
(deficit)
IntelliQuest............. $(2,729) $(2,090) $34,459 $ 1,736
Pipeline................. 845 1,144 1,061 1,216
------- ------- ------- -------
Combined.................... $(1,884) $ (946) $35,520 $ 2,952
</TABLE>
THE PIPELINE SUBSIDIARY HAS BEEN RENAMED INTELLIQUEST COMMUNICATIONS, INC.
3. EARNINGS PER SHARE
Earnings per share for the three-month and six-month periods ended June 30,
1996 is computed based upon the weighted average number of common and
common equivalent shares outstanding during the period. Earnings per share
for the three-month and six-month periods ended June 30, 1995 represent pro
forma earnings per share which gives effect to certain adjustments
described below. In conformity with Securities and Exchange Commission
requirements, common and common equivalent shares issued during the twelve-
month period prior to the filing of the registration statement for the
initial public offering have been included in the June 30, 1995
calculations as if they were outstanding for the entire period, using the
treasury stock method and the initial public offering price of $17.00 per
share. Additionally, 1,055,718 shares of Series A Redeemable Convertible
Preferred Stock and 797,328 shares of Series B Redeemable Convertible
Preferred Stock were assumed to have been converted to an equal number of
shares of common stock and warrants to purchase 264,480 shares of common
stock were assumed to have been exercised at the time of issuance.
* * *
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations section contains forward-looking statements (identified with an
asterisk "*") that involve risks and uncertainties. The Company's actual
results may differ significantly from the results discussed in the forward-
looking statements. For a more complete discussion of the factors that might
cause such a difference, see "Risk Factors" in the Company's initial public
offering prospectus (the "Prospectus"), contained in the Registration Statement
on Form S-1 (No. 333-00844).
OVERVIEW
IntelliQuest Information Group, Inc. (the "Company") is a leading provider
of quantitative market information to technology companies. The Company provides
timely, objective, accurate and cost-effective information about technology
markets, customers and products on both a subscription basis and a proprietary
project basis. The Company's renewable subscription-based product revenues are
derived substantially from two product lines: IntelliTrack IQ(TM) and Computer
Industry Media Study(TM) (CIMS). IntelliTrack IQ(TM) is a subscription-based
service covering a variety of technologies and geographic markets. CIMS is an
annual study that measures the readership and viewership habits of technology
purchase influencers. Renewable proprietary product revenues typically consist
of revenues from proprietary recurring tracking studies, customer registration
programs and services and the IntelliQuest Brand Tech Forum conferences.
Proprietary project research provides customized information to customers
utilizing a variety of proprietary models, research techniques and data
collection methods.
During May 1996, the Company acquired Pipeline Communications, Inc.
("Pipeline"), a privately held company that provides electronic customer
registration services worldwide. The transaction was accounted for as a pooling
of interests; thus the Company's results of operations as discussed herein
include those of Pipeline and all periods presented have been restated.
RESULTS OF OPERATIONS
Revenues. Total revenues increased from $3.6 million to $4.7 million for the
quarters ended June 30, 1995 and 1996, respectively and from $7.0 million to
$8.8 million for the six months ended June 30, 1995 and 1996, respectively.
This growth represents a 28.8% increase for the three-month period and a 24.9%
increase for the six-month period ended June 30, 1996 from the comparable 1995
periods. The increase was partly due to an increase in subscription-based
product revenues of 45.9% from $2.2 million during the six months ended June 30,
1995 to $3.2 million for the same period in 1996. Subscription-based product
revenues increased from $1.4 million to $1.6 million for the three months ended
June 30, 1995 and 1996, respectively. The increase in subscription-based
revenues was generated by several factors including the timing of contract
closure and an increase in base subscriptions. The Company has focused efforts
on closing annual contracts on a more timely basis during 1996, which the
Company hopes will result in a smoother revenue stream for subscription-based
products during the year.* Subscription-based revenues from the Company's
CIMS product are deferred until the actual release date, which is anticipated to
occur during the third quarter of 1996.* Renewable proprietary* products
revenues increased 29.0% from $1.5 million to $1.9 million for the quarters
ended June 30, 1995 and 1996, respectively and 24.3% from $3.1 million to $3.9
million for the six months ended June 30, 1995 and 1996, respectively. This
increase resulted primarily from an increase in customer registration revenues.
The Company anticipates that customer registration revenues will continue to
increase during the remainder of 1996; however such revenues are primarily a
function of the timing of customer shipments over which the
- ------------------------------
* This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations due to factors
described in this Management's Discussion and Analysis of Financial Condition
and Results of Operations and in the Prospectus.
9
<PAGE>
Company has no control.* Revenues for proprietary project research decreased
2.2% from $1.7 million during the six months ended June 30, 1995 to $1.6 million
during the same period in 1996. These revenues increased 65.8% from $707,000 for
the second quarter 1995 to $1.2 million for the same period in 1996. Year-to-
date, the Company is experiencing a migration of this business to its Technology
Panel, which the Company believes is a more efficient and cost effective method
of performing research.
International revenues (revenues generated by research performed on geographical
regions outside of the U.S.) were $1.6 million (34.8% of total revenues) and
$1.3 million (36.4% of total revenues) for the three months ended June 30, 1996
and 1995, respectively, and $3.0 million (34.3% of total revenues) and $2.0
million (28.8% of total revenues) for the six months ended June 30, 1996 and
1995, respectively. This increase was due to several factors including a growth
in international subscription base, more expedient closure of international
subscription-based products contracts during 1996, accelerated timing of
completion on certain international subscription products and growth of
international customer registration services. The Company expects that revenues
from international market research will continue to account for a significant
portion of its revenues and intends to continue to expand its international
market research efforts.* Any material decline in the Company's ability to
provide and market timely, high-quality data that is consistent across
international markets would have a material adverse affect on the Company's
results of operations.
Costs of Revenues. Costs of revenues are primarily composed of data collection,
labor charges, telecommunications charges and other costs directly attributable
to products or projects. Costs of revenues decreased as a percentage of total
revenues from 46.2% ($1.7 million) to 39.9% ($1.9 million) for the quarters
ended June 30, 1995 and 1996. Costs of revenues also decreased as a percentage
of total revenues for the six months ended June 30, 1996 as compared to the same
period in 1995 from 46.5% ($3.3 million) to 42.0% ($3.7 million). This decrease
as a percentage of total revenues was due to the increase in subscription-based
revenues (see discussion above) which is a highly leverageable business allowing
costs of revenues to remain fairly constant even as revenues fluctuate, and to
decreased costs of international data collection which resulted from utilization
of the Company's new United Kingdom data collection facilities.
Sales, General and Administrative Expenses. Sales, general and administrative
expenses consist primarily of personnel and other costs associated with sales,
marketing, administration, finance, information systems, human resources and
general management. Sales, general and administrative expense for the second
quarter of 1996 increased to $1.4 million, a 9.0% increase, as compared to $1.3
million in the second quarter of 1995, and increased 7.8% to $2.8 million for
the first six months of 1996 from $2.6 million during the same period in 1995.
As a percentage of total sales, sales general and administrative expense
decreased to 30.6% for the second quarter of 1996 from 36.2% for the second
quarter of 1995 and decreased to 31.9% for the six months ended June 30, 1996
from 36.9% for the same period in 1995. The aggregate increase was a result of
several items including additional expenses associated with becoming a public
company and the acquisition of Pipeline as well as expansion of the Company's
sales and marketing departments and its United Kingdom facilities.
Product Development Expenses. Product development expenses are composed of
resources, primarily labor and data collection charges, dedicated to the
development of several new products. Product development expenses were $1.1
million and $454,000 for the three months ended June 30, 1996 and 1995,
respectively, and $1.7 million and $838,000 for the six months ended June 30,
1996 and 1995, respectively. As a percentage of total revenues, product
development expenses represented 23.2% and 12.5% for the second quarter 1996 and
1995, respectively, and 19.3% and 11.9% for the six months ended June 30, 1996
and 1995, respectively.
- -----------------------------
* This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations due to factors
described in this Management's Discussion and Analysis of Financial Condition
and Results of Operations and in the Prospectus.
10
<PAGE>
This increase was due to the Company's increased development efforts on Internet
related products. The Company intends to give continued priority to development
of these products throughout 1996.*
Depreciation and Amortization. Depreciation and amortization increased 112.5%
from $80,000 to $170,000 for the quarters ended June 30, 1996 and 1995,
respectively, and 124.8% from $141,000 to $317,000 for the six months ended June
30, 1995 and 1996, respectively. This increase was due to a high level of
capital equipment acquisitions during the first quarter of 1996 including
establishing two new data collection facilities and installation of corporate-
wide standardized computer platforms, networks and software to accommodate more
efficient data communications.
Income Taxes. Provision for income taxes as a percentage of income before
income taxes represents 21.0% for the quarter and 28.5% for the six months ended
June 30, 1996. These rates are below the Company's combined federal and state
income tax rates due to two factors. The net proceeds from the Company's initial
public offering that closed in March 1996 have typically been invested in tax-
free investments. Also, the Company has not recorded any income tax benefit
resulting from operating losses generated by Pipeline. Provision for income
taxes for the six months ended June 30, 1995 represents 75.4% of income before
income taxes because the Company did not record any income tax benefit resulting
from Pipeline losses.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company had cash and cash equivalents of $26.4
million and positive working capital of $27.6 million.
During the six months ended June 30, 1996, the Company used $195,000 of
cash in operating activities while it generated $658,000 of cash during the same
period last year. This decrease in cash flow is mainly due to the timing of
payment of income taxes and costs incurred in advance of sales on certain
projects combined with typical activity in accounts receivable, unbilled
revenues and deferred revenues.
For the six months ended June 30, 1996 and 1995, net cash used in investing
activities was $900,000 and $251,000, respectively. This increase in cash used
was mainly the result of several factors including a high level of equipment,
furniture and leasehold improvement acquisitions during 1996 resulting from the
establishment and expansion of new data collection facilities and installation
of corporate-wide standardized computer platforms, networks and software to
accommodate more efficient data communications.
The Company has budgeted approximately $1.6 million for capital
expenditures in 1996, to be funded primarily through cash generated from
operations. As of June 30, 1996, the Company had expended $789,000 in capital
acquisitions and anticipates that it will remain within its budgeted costs for
the remainder of the year.* The Company expects that future 1996 capital
expenditures will consist primarily of telecommunications equipment, and
computer hardware and software purchases to continue to upgrade, replace and
improve existing systems and improvements in data collection and processing
facilities.*
Pursuant to the billing terms between the Company and its customers, the
Company typically bills customers for products or projects on varying terms
including advanced billing and periodic billing reflecting performance of
service. Billed amounts are recorded as deferred revenues on the Company's
financial statements and are recognized as income when earned. As of June 30,
1996 and 1995, the Company had $3.0 million and $4.4 million of deferred
revenues, respectively. In addition, when work is performed in advance of
billing, the Company will record this work as unbilled revenue. As of June 30,
1996 and 1995, the Company's unbilled revenues has remained constant at $1.2
million. Substantially all deferred and unbilled revenues will be earned and
billed, respectively, during the following year.*
- ----------------------------
* This statement is forward-looking statement reflecting current
expectations. there can be no assurance that the Company's actual future
performance will meet the Company's current expectations due to factors
described in this Managements's Discussion and Analysis of Financial Condition
and Results of Operations and in the Prospectus.
11
<PAGE>
During March 1996, the Company completed an initial public offering in
which the Company sold 1,635,000 shares of its common stock for net proceeds to
the Company of $25.8 million. Upon closing of the initial public offering, each
outstanding share of the Company's Series A and Series B Redeemable Convertible
Preferred Stock was automatically converted into one share of common stock of
the Company and outstanding warrants were exercised to purchase common stock of
the Company resulting in the issuance of 2,117,526 shares of common stock.
The Company maintains two revolving lines of credit and an equipment note
payable. The revolving lines of credit total $3.2 million and are maintained to
fund cash requirements from time to time. Borrowings under both lines of credit
bear interest at a rate per annum equal to the prime rate plus one percent and
are subject to compliance by the Company with certain financial covenants. At
June 30, 1996, the Company was in compliance with all such covenants and there
was $59,400 outstanding under such lines of credit. The lines of credit mature
on August 8 and October 30, 1996 and the Company has begun negotiations to renew
them. The equipment note payable bears interest at a rate per annum of 11% and
is also subject to compliance by the Company with the same financial covenants
as the lines of credit. The equipment note payable is due in monthly
installments through June 15, 1998 and had an outstanding balance of $78,200 as
of June 30, 1996.
The Company believes that cash flows from operations, existing cash
balances and the lines of credit will be sufficient to meet its working capital
and capital expenditure requirements for at least the next 12 months.* Beyond
that time, if cash flows from operations and the lines of credit are not
sufficient to satisfy its financing needs, the Company may seek additional
funding through the sale of its securities, including equity securities. There
can be no assurance that such funding can be obtained on favorable terms, if at
all.
RISK FACTORS
The Company's operating results in any particular fiscal period have
fluctuated in the past and will likely fluctuate significantly in the future due
to various factors.
The Company anticipates that customer registration revenues will continue
to increase during the remainder of 1996; however, such revenues are primarily a
function of the timing of customer shipments, over which the Company has no
control.* Thus, delays in customer orders or acceptance of custom software
applications for customer registration could have a material adverse affect on
future quarters' operating results.
Substantially all revenues and expenses attributable to CIMS for a
particular year are recognized in the third quarter of that year, when the final
study is usually completed and delivered. Although the Company does not
anticipate it at this time, a delay in delivering the final study could postpone
recognition of such revenues and expenses until the fourth quarter, which would
materially affect operating results for the third and fourth quarters.*
A large majority of the Company's customer contracts terminate after one
year and are renewable at the discretion of the customer, although no obligation
to renew exists. At this time, the Company has no reason to believe that there
will be any material contracts which will not be renewed or the renewal of which
will be delayed during fiscal 1996.* However, to the extent that customers fail
to renew or defer their renewals, the Company's quarterly operating results may
be materially adversely affected.
The Company believes its success will depend in part upon its ability to
anticipate and satisfy customer demand for new products and services and
information about additional geographic areas. As a result, the Company expects
to continue expending significant resources to develop its proprietary customer
registration/response software products, to develop Internet-based information
collection tools and information services and to expand the Company's ability to
improve its operations and systems, manage the quality of its
- --------------------------
* This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations due to factors
described in this Management's Discussion and Analysis of Financial Condition
and Results of Operations and in the Prospectus.
12
<PAGE>
products, and market its new products.* Factors such as the Company's ability
to improve its operations and systems, manage the quality of its products, and
market its new products under possible price pressures and increased competition
could have a material adverse affect on results of operations.
Although the Company has historically relied on customer referrals
supplemented by its own sales and marketing efforts to generate the majority of
its revenue growth, it anticipates expending significant resources to develop a
more traditional direct sales model which it believes is necessary to facilitate
its growth as it develops new products and services targeted at broader-based
market segments.* Thus, the Company's future operating results may be materially
affected by its unproven ability to hire, train, deploy and manage an
increasingly large direct sales force.
In addition, the Company has historically relied on, and expects to
continue to rely on a limited number of key customers for the majority of its
revenues. * Therefore, consolidation among its top customers or the loss of one
or more of its large customers or a significant reduction in business from such
customers could have a material adverse affect on future results of operations.
As the Company's expands geographically, it anticipates increased exposure
to foreign currency rate fluctuations. * The Company expects to address its
exposure as needed to reduce or eliminate potential losses associated with this
growth.* However, potential fluctuations in the value of the U.S. dollar as
compared to other various currencies in which the Company operates facilities
could have an adverse affect on results of operations.
OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Statement re: computation of per share earnings.
(b) Reports on Form 8-K
A Form 8-K dated May 31, 1996 was filed June 14, 1996 reporting the
acquisition of Pipeline Communications, Inc. under the pooling of
interests method of accounting. No financial statements were filed at
that time. A form 8-K amending the Form 8-K dated May 31, 1996 was
filed August 14, 1996 and included audited financial statements of
Pipeline Communications, Inc. and unaudited proforma financial
information of the consolidated entity.
- -----------------------------
* This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's future performance
will meet the Company's current expectations due to factors described in this
Management's Discussion and Analysis of Financial Condition and Results
of Operations and in the Prospectus.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED August 14, 1996
IntelliQuest Information Group, Inc.
(Registrant)
By: /s/ James Schellhase
---------------------------------
James Schellhase
Chief Operating Officer and Chief Financial
Officer
14
<PAGE>
Exhibit 11.1
INTELLIQUEST INFORMATION GROUP, INC.
STATEMENT REGARDING COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the six months
Ended
June 30, 1996
------------------
<S> <C>
Net income available to common stockholders $ 381
------
Weighted average shares outstanding:
Common stock..................................................................... 5,748
Common stock issued upon exercise of options granted through June 30, 1996 (2)... 195
Common stock issued upon the acquisition of Pipeline............................. 508
Common stock issued upon exercise of options and
warrants related to acquisition of Pipeline (2).................................. 31
------
Weighted average common shares and equivalents.................................... 6,482
------
Net income per share.............................................................. $.06
------
</TABLE>
_____________________
(1) This exhibit should be read in conjunction with Note 3 of Notes to Condensed
Consolidated Financial Statements.
(2) Stock options granted and warrants exercised, using the treasury stock
method, have been included in the calculation of the common stock equivalent
shares.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 26,391
<SECURITIES> 0
<RECEIVABLES> 3,687
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 33,354
<PP&E> 2,021
<DEPRECIATION> 0
<TOTAL-ASSETS> 35,520
<CURRENT-LIABILITIES> 5,734
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 29,647
<TOTAL-LIABILITY-AND-EQUITY> 35,520
<SALES> 8,766
<TOTAL-REVENUES> 8,766
<CGS> 0
<TOTAL-COSTS> 3,685
<OTHER-EXPENSES> 4,802
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 533
<INCOME-TAX> 152
<INCOME-CONTINUING> 381
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 381
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
