<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: September 30, 1998
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: 0-27680
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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 OCTOBER 31, 1998
Common Stock, $.0001 par value 8,237,229
1
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INTELLIQUEST INFORMATION GROUP, INC.
INDEX
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PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet
September 30, 1998 (unaudited) and December 31, 1997 3
Condensed Consolidated Statement of Operations (unaudited)
Three months ended September 30, 1998 and 1997 4
Condensed Consolidated Statement of Operations (unaudited)
Nine months ended September 30, 1998 and 1997 5
Consolidated Statement of Comprehensive Income (unaudited)
Three months ended September 30, 1998 and 1997 6
Consolidated Statement of Comprehensive Income (unaudited)
Nine months ended September 30, 1998 and 1997 7
Condensed Consolidated Statement of Cash Flows (unaudited)
Nine months ended September 30, 1998 and 1997 8
Notes to Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 24
Signatures 25
</TABLE>
2
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
INTELLIQUEST INFORMATION GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
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(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents. . . . . . . . . . . . . . . . $ 1,736 $ 1,785
Short-term investments. . . . . . . . . . . . . . . 33,997 40,752
Accounts receivable, net. . . . . . . . . . . . . . 11,322 7,904
Unbilled revenues . . . . . . . . . . . . . . . . . 4,495 2,840
Projects in process . . . . . . . . . . . . . . . . 125 127
Prepaid expenses and other assets . . . . . . . . . 2,925 593
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Total current assets. . . . . . . . . . . . . . . 54,600 54,001
Furniture and equipment, net. . . . . . . . . . . . 2,577 4,436
License agreements, net . . . . . . . . . . . . . . 7,376 7,500
Other assets. . . . . . . . . . . . . . . . . . . . 1,528 1,470
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Total assets. . . . . . . . . . . . . . . . . . . $66,081 $67,407
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . $ 2,931 $ 2,474
Accrued liabilities . . . . . . . . . . . . . . . . 3,710 1,918
Deferred revenues . . . . . . . . . . . . . . . . . 2,322 2,420
Other current liabilities . . . . . . . . . . . . . 559 553
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Total current liabilities . . . . . . . . . . . . 9,522 7,365
Obligations under capital leases and deferred rent. . 112 172
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Total liabilities . . . . . . . . . . . . . . . . 9,634 7,537
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Common Stockholders' Equity:
Common stock, $.0001 par value, 30,000,000
shares authorized, 8,499,000 and 8,411,000
shares issued, respectively; 270,000 and 0
shares of treasury stock, respectively; and
8,229,000 and 8,411,000 shares outstanding,
respectively . . . . . . . . . . . . . . . . . . . 1 1
Capital in excess of par value. . . . . . . . . . . 57,241 58,834
Deferred compensation . . . . . . . . . . . . . . . (23) (33)
Accumulated other comprehensive income. . . . . . . 122 46
Accumulated (deficit) earnings. . . . . . . . . . . (894) 1,022
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Total common stockholders' equity . . . . . . . . 56,447 59,870
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Total liabilities and stockholders' equity. . . $66,081 $67,407
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
3
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INTELLIQUEST INFORMATION GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
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Revenues:
Continuous services. . . . . . . . . . . . . . . $12,445 $11,401
Other services . . . . . . . . . . . . . . . . . 1,399 1,126
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Total revenues . . . . . . . . . . . . . . . . . 13,844 12,527
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Operating expenses:
Costs of revenues. . . . . . . . . . . . . . . . 7,688 7,211
Sales, general and administrative. . . . . . . . 4,561 3,148
Product development. . . . . . . . . . . . . . . 605 551
Depreciation and amortization. . . . . . . . . . 352 244
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Total operating expenses . . . . . . . . . . . . 13,206 11,154
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Operating income . . . . . . . . . . . . . . . . . 638 1,373
Interest income, net . . . . . . . . . . . . . . . 318 494
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Income before income taxes . . . . . . . . . . . . 956 1,867
Provision for income taxes . . . . . . . . . . . . 255 485
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Net income . . . . . . . . . . . . . . . . . . . . $ 701 $ 1,382
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Basic earnings per share . . . . . . . . . . . . . $ .08 $ .16
Diluted earnings per share . . . . . . . . . . . . $ .08 $ .16
Basic weighted average shares outstanding. . . . . 8,307 8,390
Diluted weighted average shares outstanding. . . . 8,353 8,587
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
4
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INTELLIQUEST INFORMATION GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
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<S> <C> <C>
Revenues:
Continuous services. . . . . . . . . . . . . . . $29,114 $24,152
Other services . . . . . . . . . . . . . . . . . 4,676 3,376
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Total revenues . . . . . . . . . . . . . . . . . 33,790 27,528
------- -------
Operating expenses:
Costs of revenues. . . . . . . . . . . . . . . . 18,599 15,218
Sales, general and administrative. . . . . . . . 15,629 7,911
Product development. . . . . . . . . . . . . . . 3,665 1,562
Depreciation and amortization. . . . . . . . . . 970 689
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Total operating expenses . . . . . . . . . . . . 38,863 25,380
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Operating (loss) income. . . . . . . . . . . . . . (5,073) 2,148
Interest income, net . . . . . . . . . . . . . . . 1,086 1,404
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(Loss) income before income taxes. . . . . . . . . (3,987) 3,552
(Benefit from) provision for income taxes. . . . . (2,052) 773
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Net (loss) income. . . . . . . . . . . . . . . . . $(1,935) $ 2,779
------- -------
------- -------
Basic (loss) earnings per share. . . . . . . . . . $ (.23) $ .33
Diluted (loss) earnings per share. . . . . . . . . $ (.23) $ .33
Basic weighted average shares outstanding. . . . . 8,413 8,308
Diluted weighted average shares outstanding. . . . 8,413 8,477
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
5
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INTELLIQUEST INFORMATION GROUP, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
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<S> <C> <C>
Net income. . . . . . . . . . . . . . . . . . . . . $701 $1,382
---- ------
Other comprehensive income, net of tax:
Foreign currency translation adjustments, net . . 18 1
Unrealized gain on securities, net. . . . . . . . 37 19
---- ------
Other comprehensive income. . . . . . . . . . . . . 55 20
---- ------
Comprehensive income . . . . . . . . . . . . . . . $756 $1,402
---- ------
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
6
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INTELLIQUEST INFORMATION GROUP, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
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<S> <C> <C>
Net (loss) income . . . . . . . . . . . . . . . . . $(1,935) $2,779
------- ------
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments, net . . 22 (5)
Unrealized gain on securities, net. . . . . . . . 23 22
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Other comprehensive income. . . . . . . . . . . . . 45 17
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Comprehensive (loss) income . . . . . . . . . . . . $(1,890) $2,796
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
7
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INTELLIQUEST INFORMATION GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
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<S> <C> <C>
Cash flows used in operating activities:
Net (loss) income . . . . . . . . . . . . . . . $ (1,935) $ 2,779
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization . . . . . . . 1,187 689
Bad debt expense. . . . . . . . . . . . . . 316 110
Asset impairment and loss on disposal of
assets. . . . . . . . . . . . . . . . . . 2,873 30
Deferred compensation . . . . . . . . . . . 10 10
Net changes in assets and liabilities:
Accounts receivable and unbilled
revenues. . . . . . . . . . . . . . . . . (5,697) (2,169)
Prepaid expenses and other assets . . . . . (2,687) (35)
Projects in process . . . . . . . . . . . . 2 98
Accounts payable and accrued expenses . . . 2,159 942
Deferred revenues . . . . . . . . . . . . . (98) (433)
Other . . . . . . . . . . . . . . . . . . . 407 (307)
--------- ---------
Net cash (used in) provided by operating (3,463) 1,714
activities . . . . . . . . . . . . . . . . . . --------- ---------
Cash flows from investing activities:
Purchases of short-term investments . . . . . . (156,436) (130,461)
Sales and maturities of short-term
investments . . . . . . . . . . . . . . . . . 163,011 133,158
Purchases of equipment and leasehold
improvements. . . . . . . . . . . . . . . . . (866) (2,369)
Purchase of Information Technology Forum
assets, net of cash acquired. . . . . . . . . (138) -
Purchase of treasury stock. . . . . . . . . . . (2,385) -
Other . . . . . . . . . . . . . . . . . . . . . 144 -
--------- ---------
Net cash provided by investing activities. . . . 3,330 328
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Cash flows used in financing activities:
Proceeds from issuance of stock, net. . . . . . 54 80
Borrowings under line of credit . . . . . . . . - 2,265
Repayments under line of credit . . . . . . . . - (2,451)
Other . . . . . . . . . . . . . . . . . . . . . 30 27
--------- ---------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . . . 84 (79)
--------- ---------
Net (decrease) increase in cash and
equivalents . . . . . . . . . . . . . . . . . (49) 1,963
Cash and equivalents at the beginning of the
period. . . . . . . . . . . . . . . . . . . . 1,785 734
--------- ---------
Cash and equivalents at the end of the
period. . . . . . . . . . . . . . . . . . . . $ 1,736 $ 2,697
--------- ---------
--------- ---------
Supplemental cash flow disclosures:
Interest paid . . . . . . . . . . . . . . . . . $ 1 $ 24
Taxes paid. . . . . . . . . . . . . . . . . . . 49 767
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
8
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INTELLIQUEST INFORMATION GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
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Schedule of noncash investing activities:
Purchase of Information Technology Forum assets:
Working capital other than cash . . . . . . . $ 43 $ -
Equipment and leasehold improvements. . . . . 17 -
Intangibles . . . . . . . . . . . . . . . . . 821 -
Capital lease assumed . . . . . (10) -
Issuance of unregistered common stock . . . . (733) -
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Cash paid for Information Technology Forum
assets, net of cash acquired. . . . . . . . $ 138 $ -
----- ------
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
9
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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 marketing information and
database services to technology and telecommunication companies.
The accompanying unaudited interim 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
considered necessary for a fair presentation of the financial position of
the Company as of September 30, 1998 and the results of the Company's
operations and its cash flows for the nine-month periods ended September
30, 1998 and 1997. This report on Form 10-Q should be read in conjunction
with the Company's audited consolidated financial statements and related
notes included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
2. LICENSE AGREEMENT
On December 22, 1997 the Company paid $7.5 million for an exclusive
licensing agreement to market and sell database products to the high-tech,
telecommunications, cable and utility industries. In conjunction with the
agreement the Company will pay the licensor royalties and fees on revenue
from the sale of data and services.
The contract provides for annual target minimum payments. Royalties and
service fees for the database marketing products were less than that
required to satisfy the prorated annual target minimum payments under this
agreement; therefore, the Company recognized a liability at September 30,
1998 for the difference.
3. ACQUISITION OF ASSETS/ RELATED PARTY TRANSACTION
Effective January 1, 1998, the Company purchased certain assets of
Information Technology Forum, Inc. ("ITF"), a company wholly owned by
Charles W. Stryker, who was a Director of the Company at the time of the
acquisition. The assets were purchased with cash and stock and the
transaction was accounted for under the purchase method. The assets
purchased were recorded at fair value at the time of purchase. The excess
of the purchase price over the fair value of amounts assigned to the net
tangible assets purchased has been assigned to goodwill in the amount of
approximately $821,000, versus $721,000 as reported in the Company's Annual
Report on Form 10-K, due to post-closing accounting adjustments. As the
operations of ITF are immaterial to the Company as a whole, pro forma
financial statements are not disclosed.
10
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4. STOCK REPURCHASE PROGRAM
In January 1998, the Board of Directors approved the repurchase of up to
850,000 shares of the Company's common stock. As of November 10, 1998,
355,000 shares have been repurchased for $2.9 million in open market
transactions.
5. NEW ACCOUNTING PRONOUNCEMENT
In 1997, Statement of Financial Accounting Standard No. 131, "Disclosures
about Segments of an Enterprise and Related Information" was issued. SFAS
No. 131 establishes standards for the way that public business enterprises
report information about operating segments in interim financial reports
issued to shareholders, which is currently not required. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company is required to adopt
this standard for annual reporting in 1998 and quarterly reporting the
first quarter of 1999.
11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS CONTAINS TREND ANALYSIS AND OTHER
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH
FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, THE COMPANY'S
EXPECTATIONS REGARDING ITS FUTURE FINANCIAL CONDITION AND OPERATING RESULTS,
PRODUCT DEVELOPMENT, BUSINESS AND GROWTH STRATEGY, MARKET CONDITIONS AND
COMPETITIVE ENVIRONMENT. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS, INCLUDING, BUT NOT LIMITED TO RISKS ASSOCIATED WITH DATABASE
MARKETING INFORMATION SERVICES, RELIANCE ON KEY CUSTOMERS; TECHNOLOGY
INDUSTRY CONSOLIDATION; DEPENDENCE ON SUBSCRIPTION AND CONTRACT RENEWALS;
FLUCTUATIONS IN OPERATING RESULTS/SEASONALITY; MANAGEMENT OF GROWTH/POSSIBLE
ACQUISITIONS; COMPETITION; DEPENDENCE ON KEY PERSONNEL; DEVELOPMENT OF DIRECT
SALES FORCE; RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCT INTRODUCTION; DATA
COLLECTION RISKS; RISKS RELATED TO CIMS; HISTORY OF NET LOSSES/UNCERTAIN
PROFITABILITY; LIMITED PROTECTION OF PROPRIETARY SYSTEMS, SOFTWARE AND
PROCEDURES; RISKS ASSOCIATED WITH INTERNATIONAL OPERATION; AND RISKS
ASSOCIATED WITH YEAR 2000 COMPLIANCE,, AS FURTHER DISCUSSED UNDER "RISK
FACTORS".
RESULTS OF OPERATIONS
TOTAL REVENUES. Total revenues increased from $12.5 million to $13.8
million for the quarters ended September 30, 1997 and 1998, respectively and
from $27.5 million to $33.8 million for the nine months ended September 30,
1997 and 1998, respectively. This growth represents a 10.5% increase for the
three-month period and a 22.7% increase for the nine month period ended
September 30, 1998 from the comparable 1997 period.
Revenues from continuous services increased 9.2% from $11.4 million to
$12.4 million for the quarters ended September 30, 1997 and 1998,
respectively and 20.5% from $24.2 million to $29.1 million for the nine-month
period ended September 30, 1997 and 1998, respectively. The quarter to
quarter increase was due primarily to the addition of database marketing
products offset by the shift in the timing of a major conference from the
third quarter of 1997 to the fourth quarter of 1998. These factors, combined
with the expansion of renewable proprietary products and offset by
discontinued data medium sales, were responsible for the year to date
increase in revenue. Other revenue increased 24.2% to $1.4 million for the
three months ended September 30, 1998 from $1.1 million for third quarter of
1997. Other revenue increased 38.5% from $3.4 million to $4.7 million for the
nine months ended September 30, 1997 and 1998, respectively. This increase
was attributable to the addition of non-renewable database marketing products
in 1998. In addition, the year to date increase was partially offset by a
shift from non-renewable to renewable proprietary contracts.
Revenues attributable to international market research decreased 41.4%
from $2.4 million to $1.4 million for the quarters ended September 30, 1997
and 1998, respectively and 37.6% from $8.2 million to $5.1 million for the
nine months ended September 30, 1997 and 1998, respectively. Consistent with
the anticipated shift to more electronic solutions for customer registration,
data medium sales, which accounted for $500,000 of international revenues for
the quarter ended September 30, 1997 and $2.5 million for the nine months
ended September 30, 1997 were substantially discontinued by the end of 1997.
12
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COSTS OF REVENUES. Costs of revenues are primarily composed of data
collection, labor charges, database marketing service charges, royalties,
telecommunications charges and other costs directly attributable to products
or projects. Costs of revenues increased 6.6% from $7.2 million to $7.7
million for the quarters ended September 30, 1997 and 1998, respectively and
22.2% from $15.2 million to $18.6 million for the nine months ended September
30, 1997 and 1998, respectively. Costs of revenues decreased as a percentage
of total revenues from 57.6% to 55.5% for the quarters ended September 30,
1997 and 1998, respectively and decreased to 55.0% for the nine months ended
September 30, 1998 from 55.3% for the nine months ended September 30, 1997.
The decrease in the Company's cost of revenue as a percentage of total
revenues reflects a shift from discontinued data medium sales to a growing
suite of database marketing services products and cost reductions in customer
registration products. These decreases in cost of revenues were partially
offset by an increase in costs for certain syndicated products and accruals
for anticipated target minimum payments under the license agreement for
database marketing services. The quarter to quarter increase is partially
impacted by the shift in the timing of a major conference, with a lower gross
profit margin, from the third quarter of 1997 to the fourth quarter of 1998.
The first quarter of 1998 included a one-time adjustment of $360,000. Before
the impact of the one-time adjustment, cost of revenues increased 20.0% from
$15.2 million to $18.2 million for the nine months ended September 30, 1997
and 1998, respectively.
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 expenses increased 44.9% from $3.1 million to $4.6 million for
the quarters ended September 30, 1997 and 1998, respectively and 97.6% from
$7.9 million to $15.6 million for the nine months ended September 30, 1997
and 1998, respectively. As a percentage of total revenues, sales, general
and administrative expenses increased to 32.9% for the third quarter of 1998
from 25.1% for the third quarter of 1997 and to 46.3% for the nine months
ended September 30, 1998 from 28.7% for the nine months ended September 30,
1997. This increase is primarily related to an investment in a more
experienced senior management team and an operating model for the Company's
database marketing division requiring a higher sales, general and
administrative operating cost component. The year to date increase includes
one-time adjustments in the first quarter of 1998 totaling $1.5 million in
expense related to reorganization efforts. Before the effect of these
one-time charges, sales, general and administrative expenses increased 78.7%
from $7.9 million to $14.1 million for the nine months ended September 30,
1997 and 1998, respectively and the first nine months 1998 expenses were
41.8% of revenues. Acquisition costs expensed were $140,000 for the nine
months ended September 30, 1997.
PRODUCT DEVELOPMENT EXPENSES. Product development expenses include
costs incurred to develop or design new products, services or processes and
significantly enhance existing products, services, and processes. Product
development expenses were $551,000 and $605,000 for the three months ended
September 30, 1997 and 1998, respectively and $1.6 million and $3.7 million
for the nine months ended September 30, 1997 and 1998, respectively. As a
percentage of total revenues, product development expenses represented 4.4%
for both the third quarters of 1997 and 1998 and 5.7% and 10.8% for the nine
months ended September 30, 1997 and 1998, respectively. The year to date
increase is primarily related to one-time charges during the first quarter of
1998 to write-off capitalized software development costs totaling $2 million
due to an impairment in foreseeable future benefit. Before the effect of
these one-time charges, product development expenses for the first nine
months of 1998 were $1.7 million, or 5.0% of revenues, compared to $1.6
million for the first nine months of 1997.
13
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DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
44.3% from $244,000 to $352,000 for the quarters ended September 30, 1997 and
1998, respectively and 40.8% from $689,000 to $970,000 for the nine months
ended September 30, 1997 and 1998, respectively. This increase was
principally due to purchases of computer equipment, costs associated with the
acquisition of advanced data delivery alternatives to improve communications,
data processing systems required to support business growth and international
expansion during 1997, and expansion of office space.
INCOME TAXES. Provision (benefit) for income taxes as a percentage of
income before income taxes represents 26.7% for the quarter and (51.5)% for
the nine months ended September 30, 1998. This rate varies from the
Company's combined federal and state income tax rates due to significant
interest income derived from investments in tax-free investments as a
percentage of income (loss) before taxes.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Company had cash of $1.7 million, short
term investments of $34.0 million and working capital of $45.1 million.
During the nine months ended September 30, 1998, the Company used $3.5
million for operating activities versus generating $1.7 million during the
same period in the prior year. This increase in cash flow used for
operations was primarily due to the Company's first quarter net operating
loss before one-time charges combined with a shift in the timing of client
payments. Billed amounts for proprietary and syndicated products are
recorded as deferred revenues on the Company's financial statements and are
recognized as income when earned. Transaction services are billed the month
following collection of data and database services are billed when shipped.
As of September 30, 1997 and 1998 the Company had $2.4 million and $2.3
million, respectively, of deferred revenues. In addition, when work is
performed in advance of billing, the Company will record this work as
unbilled revenue. As of September 30, 1997 and 1998, the Company had $2.8
million and $4.5 million of unbilled revenues, respectively. The increase is
partially a result of a change in billing practices for database marketing
products and customer registration in 1998. In 1997 services were billed the
last day of the month; in 1998 they are billed the month following the
collection of data. Substantially all deferred and unbilled revenues will be
earned and billed, respectively, within 12 months of the respective period
ends.
For the nine months ended September 30, 1997 and 1998, the Company
generated net cash from investing activities of $328,000 and $3.3 million,
respectively, primarily from investments in short-term securities. During
1998 sales of investments exceeded purchases of investments to fund net
operating losses. The generation of net cash from investing activities was
partially offset by the Company's repurchase of 270,000 shares of its Common
Stock during the second and third quarters.
Financing activities used net cash of $79,000 for the first nine
months of 1997 and provided net cash of $84,000 during the first nine months
of 1998. The increase in funds generated are the result of the termination
of the line of credit in 1997.
The Company believes that future cash flows from operations, together
with existing cash balances and short term investments, 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 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.
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YEAR 2000 COMPLIANCE
The Year 2000 issue is a result of computer programs that were written
using two digits rather than four to define the applicable year. For
example, computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. To the extent
that the Company's software applications contain operating instructions that
are unable to interpret appropriately the upcoming calendar year 2000 and
beyond, some level of modification or replacement of such applications will
be necessary to avoid system failures and the temporary inability to process
transactions or engage in other normal business activities.
Management has implemented a company wide program to assess the computer
systems and applications for the year 2000. A team was established in 1998,
headed by the Company's chief operating officer, to coordinate the Company's
Year 2000 compliance efforts. The Year 2000 team is staffed with
representatives of the Company's management information group and the
business units. Consultants and legal counsel are being leveraged as needed.
The chief operating officer reports regularly on the status of the Year 2000
project to the Company's Board of Directors.
The Year 2000 team has substantially completed an inventory of all
computer-based systems and applications (including embedded systems) the
Company uses in its operations. The inventory includes an assessment of all
computer-based systems and applications. Corrective action plans are being
prepared and prioritized based upon criticality to the Company's operations.
The Year 2000 team is determining what modifications or replacements will be
necessary to achieve compliance; implementing the modifications and
replacements; conducting tests necessary to verify that the modified systems
are operational; and transitioning the compliant systems into the regular
operations of the Company.
The Year 2000 team is also examining the Company's relationships with
key vendors and clients with whom the Company has significant business
relationships to determine, to the extent practical, the degree of such
outside parties' Year 2000 compliance. Vendors and clients have been
prioritized based upon criticality to the Company's business operations. The
team is in the process of assessing vendor and client Year 2000 compliance.
As part of the Year 2000 compliance effort, the team will be
establishing and implementing a contingency plan to provide for viable
alternatives to ensure that the Company's core business operations are able
to continue in the event of a Year 2000-related systems failure.
The Company is currently in the assessment/remediation phases of the
compliance plan, with testing to verify compliance expected to be completed
prior to December 31, 1999. The Company expects to incur costs of
approximately $150,000 to $250,000 through 1999 for consulting,
administration, hardware, software, and other expenses associated with Year
2000 compliance. To date, the Company has incurred approximately $20,000
related to the assessment and correction phases of the Year 2000 project.
These charges are reported as a component of selling, general and
administrative expenses. The Company plans to expense maintenance costs as
incurred, while costs of updated software and hardware will be amortized over
the respective lives of the assets. The total cost of the project is being
funded through operating cash flows.
The Company does rely on third-party providers for key services such as
telecommunications and database marketing services. Interruption of these
services could, in management's view, have a material impact on the
operations of the Company. Efforts have begun to evaluate the readiness of
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these critical suppliers. Management believes that, should the Company or
other third parties, with whom the Company has a significant business
relationship, have a Year 2000-related systems failure, the most significant
impact would likely be the inability to deliver products in a timely fashion
to its clients, to receive certain products from vendors, or to process
electronically certain internal database programs. The impact could be
material to the Company's liquidity or results of operations.
STOCK REPURCHASE PROGRAM
In January 1998, the Board of Directors approved the repurchase of up to
850,000 shares of the Company's outstanding common stock. As of November 10,
1998, 355,000 shares have been repurchased for $2.9 million in open market
transactions.
FOREIGN CURRENCY
The Company's exposure to foreign currency rate fluctuations has been
relatively low. First, the Company generally requires payment from its
customers in U.S. dollars. Second, the Company controls vendor related
foreign currency risk both through contractual clauses requiring clients to
reimburse the Company for any material losses on contracts caused by exchange
rate fluctuations and by locking in forward currency contracts. The Company's
objective in managing the exposure to foreign currency fluctuations is to
reduce earnings and cash flow volatility associated with foreign exchange
rate changes. Accordingly, the Company utilizes foreign currency option
contracts and forward contracts to hedge a portion of its exposure on
anticipated transactions and firm commitment transactions. The currency
hedged is the British pound. The Company monitors its foreign exchange
exposures to ensure the overall effectiveness of its foreign currency hedge
positions. However, there can be no assurance the Company's foreign currency
hedging activities will substantially reduce the impact of fluctuations in
currency exchange rates on its results of operations and financial position.
As of September 30, 1998, the Company had entered into open forward contracts
for U.S. dollar / British pound sterling transactions with a notional value
of approximately $454,000.
RISK FACTORS
RISKS ASSOCIATED WITH DATABASE MARKETING INFORMATION SERVICES. The
Company plans to achieve a significant portion of its future revenue growth
through the expansion of its customer registration business and the
development of database marketing products. The Company has limited
experience in the database marketing industry and there can be no assurance
that the Company will be successful in developing and marketing its new line
of database marketing products. The Company also intends to rely in large
part on strategic alliances and the acquisition of related technologies in
order to expand its database marketing offerings. The Company's management
has limited experience dealing with the issues of product, systems, personnel
and business strategy integration posed by such alliances and acquisitions,
and no assurance can be given that such alliances and acquisitions will be
managed without a material adverse effect on the business of the Company.
The Company intends to process its database marketing solutions through a
licensing agreement under which the Company has a perpetual, but cancelable,
contract to receive such services from the licensor. The Company currently
has no other means of providing alternative methods of processing in the
event of a natural catastrophe, cancellation of the contract, or other
unforeseeable event. In addition, a significant amount of projected database
marketing revenues is attributable to this licensing agreement, which is
cancelable by either party under certain conditions. Sales to-date under
this agreement have not achieved the targeted minimums, therefore, the
Company has accrued an expense to cover the anticipated targeted minimum
payments.
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HISTORY OF NET LOSSES; UNCERTAIN PROFITABILITY. The Company incurred
net annual losses in each year from 1991 through 1994 before recording a net
profit in each of 1995, 1996 and 1997. In addition, the Company experienced
a net loss for the first and second quarters of 1998. In view of the
Company's prior operating history and recent reorganization, there can be no
assurance that the Company will be able to maintain profitability on a
quarterly or annual basis or that it will be able to sustain or increase its
revenue growth in future periods.
RELIANCE ON KEY CUSTOMERS; TECHNOLOGY INDUSTRY CONSOLIDATION. The
Company has relied on a limited number of key customers for the majority of
its revenues. The Company's 10 largest customers in 1997 generated 55.1%
of the Company's revenues for the year. In 1997, the Company's two largest
customers, IBM and Hewlett-Packard, each accounted for over 10% of the
Company's revenues and together accounted for 27.7% of revenues. The Company
expects that three customers will each account for over 10% of revenues in
1998. Over time key customers will vary depending upon the seasonality or the
nature of the contracts. Substantially all of the Company's subscriptions
and customer contracts are renewable annually at the option of the Company's
customers, although no obligation to renew exists and a customer generally
has no minimum purchase commitments thereunder. In addition, significant
consolidation of companies in the technology industries served by the Company
is underway, a trend which the Company believes will continue. Consolidation
among the Company's top customers could adversely affect aggregate customer
budgets for the Company's products and services. No assurances can be given
that the Company will maintain its existing customer base or that it will be
able to attract new customers. The loss of one or more of the Company's large
customers or a significant reduction in business from such customers,
regardless of the reason, would have a material adverse effect on the
Company.
DEPENDENCE ON SUBSCRIPTION AND CONTRACT RENEWALS. In 1997, 87.0% of the
Company's revenues were derived from subscriptions to the Company's renewable
subscription-based products and contracts for renewable proprietary products.
The Company expects that a material portion of its revenues for the
foreseeable future will continue to be derived from such subscriptions and
contracts. Substantially all such subscriptions and customer contracts are
renewable annually at the option of the Company's customers, although no
obligation to renew exists and a customer generally has no minimum purchase
commitments thereunder. To the extent that customers fail to renew or defer
their renewals from the quarter anticipated by the Company, the Company's
quarterly results may be materially adversely affected. The Company's ability
to secure renewals is dependent upon, among other things, its ability to
deliver consistent, high-quality and timely data. In addition, the marketing
and market research activities of the Company's customers are dependent on
the timing of their new product introductions, size of marketing budgets,
operating performance, industry and economic conditions and changes in
management or ownership. As a result of such factors, there can be no
assurance that the Company will be able to maintain its historically high
renewal rates. Any material decline in renewal rates from such levels would
have a material adverse effect on the Company's operating results.
FLUCTUATIONS IN OPERATING RESULTS; SEASONALITY. 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 expects that revenues from customer registration products will
continue to increase. However, such revenues are primarily a function of the
timing of customer shipments, which can be difficult to forecast and over
which the Company has no control. Any delay in customer orders for the
Company's customer registration products, or a decrease in orders due to
adoption by customers of custom software applications, could have a material
adverse effect on the Company's future operating results. In addition,
substantially all revenues and expenses attributable to the Company's CIMS
product for a particular year are deferred and recognized when the final
study is
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completed and delivered, usually in the third quarter of that year. Although
CIMS was delivered in the third quarter of 1998, delays in delivering the
final study in future years could postpone recognition of such revenues and
expenses until the fourth quarter of such year, which would materially affect
operating results for such third and fourth quarters. Furthermore, all costs
related to CIMS are included in cost of revenues and none are allocated to
sales, general and administrative costs, which historically has reduced the
Company's third quarter gross margin below that of other quarters. The
database services operations provide a variety of services with significantly
different profit margins. The Company has experienced quarterly variances in
the product mix which causes cost of revenues to fluctuate. Many of the
Company's customers operate in industry segments that are becoming
increasingly seasonal as technology vendors have increased their focus on
consumer markets, with sales in the fourth calendar quarter constituting a
growing portion of the annual sales of such customers. This may translate
into seasonal demand for the Company's products, particularly the customer
registration products. In addition, the Company's operating results may
fluctuate as a result of a variety of other factors, including the timing of
orders from customers, the size and timing of orders for customer
registration products, response rates on customer information products,
delays in development and customer acceptance of custom software
applications, product or panel development expenses, new product or service
introductions or announcements by the Company or its competitors, levels of
market acceptance for new products and services, the hiring and training of
additional staff and customer demand for market research, as well as geeral
economic conditions. Because a significant portion of the Company's overhead
is fixed in the short term and because spending commitments must be made in
advance of revenue commitments by customers, the Company's results of
operations may be materially adversely affected in any particular quarter if
revenues fall below the Company's expectations. These factors, among others,
make it likely that in some future quarter the Company's operating results
may be below the expectations of securities analysts and investors, which
would have a material adverse effect on the market price of the Company's
Common Stock.
DEVELOPMENT OF DIRECT SALES FORCE. The Company has historically relied
on customer referrals, supplemented by its own sales and marketing efforts,
to generate the majority of its revenue growth. As the Company develops new
products and services targeted at more complex, integrated marketing
solutions, it intends to continue to develop and expand its sales force. The
Company's plans for future growth may depend in part on, among other things,
its unproven ability to hire, train, deploy, manage and retain an
increasingly large and more sophisticated direct sales force. There can be no
assurance that the Company will be able to develop or manage such a sales
force.
MANAGEMENT OF GROWTH; POSSIBLE ACQUISITIONS. Since inception, the
Company's growth has placed significant demands on the Company's management,
administrative, operational and financial resources. In order to manage its
growth, the Company will need to continue to implement and improve its
operational, financial and management information systems and continue to
expand, motivate and effectively manage an evolving and expanding workforce.
If the Company's management is unable to effectively manage under such
circumstances, the quality of the Company's products, its ability to retain
key personnel and its results of operations could be materially adversely
affected. Furthermore, there can be no assurance that the Company's business
will continue to expand. The Company's growth could be adversely affected by
reductions in customers' spending on market research or customer information
products, increased competition, possible pricing pressures and other general
economic trends. Although market research expenditures by technology
companies have increased in recent years as such companies have adopted
certain marketing strategies traditionally utilized by consumer goods
manufacturers, there can be no assurance that this trend will continue or
that technology companies will continue to rely on externally-generated
market research to enhance the marketing of their products.
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The Company hopes to achieve a portion of its future revenue growth, if
any, through acquisitions of complementary businesses, products or
technologies, although the Company currently has no commitments or agreements
with respect to any such acquisition. The Company's management has limited
experience dealing with the issues of product, systems, personnel and
business strategy integration posed by acquisitions, and no assurance can be
given that any past or possible future acquisitions will be managed without a
material adverse effect on the business of the Company. In addition, there
can be no assurance that any possible future acquisition will not dilute the
Company's earnings per share.
COMPETITION. Overall, the technology-focused market research industry
is highly competitive. The Company has traditionally competed directly with
relatively small, local providers of survey-based technology-focused market
research. The Company also competes directly with third party providers of
customer information software, such as Leader Technologies, Inc. and
Encompass, Inc., as well as vendors' own customer information software. In
addition, the Company competes indirectly with significant providers of (i)
analyst-based, technology-focused market research (such as Gartner Group,
Inc., META Group, Inc. and Forrester Research, Inc.); (ii) survey-based,
general market research (such as NFO Research, Inc., Market Facts, Inc.,
Information Resources, Inc. and The NPD Group, Inc.); (iii) analyst-based,
general business consulting and (iv) database marketing (such as Axciom
Corporation and Metromail Corporation). Most of these competitors have
substantially greater financial, information gathering and marketing
resources than the Company and could decide to increase their resource
commitments to the Company's market. Moreover, each of these companies
currently competes indirectly, if not directly, for funds available within
aggregate industry-wide market research budgets. There are few barriers to
entry into the Company's market, and the Company expects increased
competition in one or more market segments addressed by the Company, which
could adversely affect the Company's operating results through pricing
pressure, required increased marketing expenditures and loss of market share,
among other factors. There can be no assurance that the Company will continue
to compete successfully against existing or new competitors.
DEPENDENCE ON KEY PERSONNEL. The Company's future performance will
depend to a significant extent upon the efforts and abilities of key
personnel who have expertise in developing, interpreting and selling
survey-based information for technology markets and database services to
technology, telecommunications, cable and utility markets. Although customer
relationships are managed at many levels in the Company, the loss of one or
more of IntelliQuest's corporate officers or senior managers could have an
adverse effect on the Company's business. The Company's success may also
depend on its ability to hire, train and retain skilled personnel in all
areas of its business. Competition for qualified personnel in the Company's
industry and geographic markets is intense. Many of the companies with which
the Company competes for qualified personnel have substantially greater
financial and other resources than the Company. Furthermore, competition for
qualified personnel can be expected to become more intense as competition in
the Company's industry increases. There can be no assurance that the Company
will be able to recruit, retain and motivate a sufficient number of qualified
personnel to compete successfully.
RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCT INTRODUCTION. The Company's
customers compete in markets characterized by rapid, continual technological
change. The Company's success will depend in part upon its ability to
anticipate and keep pace with rapidly changing technology and to add new
products and services which address the increasingly sophisticated, rapidly
changing and demanding needs of its customers and their evolving market
strategies. In particular, the Company is
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expending significant resources to develop its proprietary customer
information products to take advantage of certain market opportunities.
However, such software products may contain defects following customization
or when new versions are released; the Company has in the past discovered
software defects in certain of its products and may experience delays or lost
revenue to correct such defects in the future. In addition, the significant
growth in the use of the World Wide Web has created the opportunity to use
the Internet as an information transmission medium. Accordingly, the Company
is expending significant resources to develop additional Internet-based
information collection tools and data delivery. There can be no assurance,
however, that the Company will be successful in developing and marketing, on
a timely basis, these or other new or improved products and services that
adequately and competitively address the needs of the marketplace. Any
failure to continue to provide insightful and timely data in a manner that
meets rapidly changing market needs could materially and adversely affect the
Company's future operating results.
DATA COLLECTION RISKS. The Company currently collects information both
telephonically and electronically. In addition, certain of the Company's new
products and services involve the use of the Internet and commercial online
services to gather information from end users for processing and sale to
customers of the Company. A number of legislative initiatives exist
domestically and abroad that seek to regulate the telephonic or electronic
collection of data about persons. In addition, an increasing number of court
cases have been brought seeking damages and injunctive relief for actions
allegedly violating "rights of privacy." (See privacy policy in Item 5 -
Other Information.) The law in this area, both statutory and case law, is
highly unsettled. No assurance can be given, therefore, that the Company will
be allowed to continue to pursue existing or proposed new products and
services. In addition, the Company's ability to provide timely and accurate
market research to its customers depends on its ability to collect large
quantities of high quality data through interviews, customer registrations,
product satisfaction questionnaires and certain other surveys. If receptivity
to the Company's customer registration, interview and survey methods by
respondents declines, or for some other reason their willingness to complete
and return surveys, registrations, or other information declines, or if the
Company for any reason cannot rely on the integrity of the data it receives,
it would reduce the quantity and/or quality of the data the Company seeks to
disseminate and would have a material adverse effect on the Company's ability
to market and sell its market research products and on its results of
operations.
RISKS RELATED TO CIMS. CIMS is one of the leading databases of media
readership and viewership habits of both business and household technology
purchase influencers in the United States. Because many advertisers use CIMS
data as a key component in their media buying decisions and because many
media companies use CIMS data to promote their media properties, such data
can have a significant impact on advertiser demand for, and advertising rates
charged by, such media properties. In the past, it has not been unusual for
media companies with properties that have not performed well in the studies
to be dissatisfied with the results of the studies or the manner in which
such results have been used by their competitors. Although media company
dissatisfaction has not resulted in litigation against the Company, there can
be no assurance that the Company will not face future litigation as a result
of media company dissatisfaction with CIMS or the results thereof, and if
initiated, that such litigation will not have a material adverse effect on
the Company's business, financial condition or results of operations.
LIMITED PROTECTION OF PROPRIETARY SYSTEMS, SOFTWARE AND PROCEDURES. The
Company's success is in part dependent upon its proprietary software
technology, research methods, data analysis techniques, and internal systems
and procedures that it has developed specifically to serve customers in the
technology industry. The Company has no patents; consequently, it relies on a
combination of copyright, trademark and trade secret laws and employee and
third party non-disclosure agreements to protect its
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proprietary systems, software and procedures. There can be no assurance that
the steps taken by the Company to protect its proprietary rights will be
adequate to prevent misappropriation of such rights or that third parties
will not independently develop functionally equivalent or superior systems,
software or procedures. The Company believes that its systems, software and
procedures and other proprietary rights do not infringe upon the proprietary
rights of third parties. There can be no assurance, however, that third
parties will not assert infringement claims against the Company in the future
or that any such claims will not require the Company to enter into materially
adverse license arrangements or result in protracted and costly litigation,
regardless of the merits of such claims.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. Revenues attributable
to international market research represented 28.6% of the Company's revenues
for 1997 and 15.1% of the Company's revenues for the nine months ended
September 30, 1998. The Company expects that revenues from international
market research will continue to account for a material portion of its
revenues. However, the Company's international data collection operations are
subject to numerous inherent challenges and risks, including maintenance of
an international data collection network that adheres to the Company's
quality standards, fluctuations in exchange rates, foreign political and
economic conditions, tariffs and other trade barriers, longer accounts
receivable collection cycles and potentially adverse tax consequences. In
addition, demand for the Company's international market research depends on
the international sales and operations of its customers, which may increase
or decrease over time. The addition of market research coverage in new
geographic territories can be expected to require the commitment of
considerable management and financial resources and may negatively impact the
Company's near-term results of operations. 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 effect
on the Company's results of operations.
VOLATILITY OF STOCK PRICE. The trading price of the Company's Common
Stock has been volatile and is likely to continue to be subject to wide
fluctuations in response to a variety of factors, including quarterly
variations in operating results, the signing of new contracts, new customers,
consolidations in the industry, technological innovations or new products by
the Company or its competitors, changes in senior management, developments
in patents or other intellectual property rights, general conditions in the
technology-focused market research industry, revised earnings estimates,
comments or recommendations issued by analysts who follow the Company, its
competitors or the technology-focused, market research industry and general
economic and market conditions. In addition, it is possible that in some
future period the Company's operating results may be below the expectations
of public market analysts and investors. In such event, the price of the
Company's Common Stock could be materially adversely affected. Additionally,
the stock market in general has experienced extreme price volatility in
recent years. Volatility in price and volume has had a substantial effect on
the market prices of many companies for reasons unrelated or disproportionate
to the operating performance of such companies. These broad market
fluctuations could have a significant impact on the market price of the
Company's Common Stock.
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Part II. Other Information
Item 1. Legal Proceedings
The Company is plaintiff and defendant in various lawsuits in the
ordinary course of business, none of which the Company considers
material.
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
I. STOCKHOLDER RIGHTS AGREEMENT
On October 30, 1998, the Company filed a report on Form 8-K which describes
the Company's adoption of a Stockholder Rights Agreement on October 19,
1998 and the declaration of a dividend of one preferred share purchase
right for each outstanding share of common stock of the Company outstanding
at the close of business on November 2, 1998.
II. PRIVACY POLICY
During the third quarter, the Company adopted the following privacy policy.
The IntelliQuest Marketing Information Solutions division is committed to
responsible management of consumer information and abides by all rules,
both ethical and legal, with respect to the use of consumer information. We
strictly adhere to all industry guidelines, and continually monitor and
enhance how we manage the use and security of consumer information.
IntelliQuest MKIS provides product registration services, commercially
available data, innovative database marketing solutions and analysis to
high technology, telecommunications, utilities and cable companies.
IntelliQuest is a publicly held company and subject to the rules and
regulations of the Securities and Exchange Commission (SEC). IntelliQuest
fully complies with the reporting requirements of the SEC and Nasdaq, the
stock exchange on which we are traded.
An important component of our general business is to process registration
information provided by consumers of technology products. We use this
information to enable our clients to identify their technology customers.
We serve our clients by helping them market smarter, promoting their
products efficiently and effectively to persons who are interested in them.
We serve the larger consumer community by respecting their privacy rights
and desire for less intrusive selling.
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To ensure that consumers have the ultimate right to control dissemination
of their personal information, we support the self-regulatory efforts of
the direct marketing industry and believe such actions are the best way to
protect the privacy of the consumer. We support legislation and regulatory
efforts that introduce fair, workable guidelines to protect the privacy of
consumers. We will work to ensure that any such guidelines are consistent
with and complement established self-regulatory measures, and that they
allow the consumer to continue receiving the benefits that sophisticated
marketing techniques can provide.
HOW WE PROTECT YOUR PRIVACY
IntelliQuest recognizes that the privacy of individual consumers is vital
to its business. We recognize also that consumers have the right to
understand how information about them is disseminated. Therefore,
IntelliQuest has established a strict business policy in regard to
acquiring, managing, and distributing consumer information. The key points
of this policy are as follows:
- IntelliQuest carefully maintains compliance with all applicable
consumer privacy laws and the Direct Marketing Association's (DMA)
ethical practices on the appropriate usage of consumer data. We work
closely with trade associations such as the DMA that support consumer
privacy.
- IntelliQuest monitors legislative and regulatory activity on privacy
issues to ensure that changes are reflected in company policies.
- In our general business practice, IntelliQuest does not disclose the
identity of its registration consumers. We append our technographic
information to existing third party consumer databases already
available in the marketplace. IntelliQuest MKIS acquires its data
about technology usage using our proprietary, secure private network
and software.
- IntelliQuest does not collect any personal information from visitors
to our Web site.
- Access to information stored for our clients is monitored and
controlled by an array of security procedures, including a
sophisticated security system complemented by vigorous physical
security of our facilities. Access to certain critical areas of our
workplace is strictly limited.
- We thoroughly educate our employees on the importance of consumer
privacy and on the issues and laws surrounding individual rights to
privacy. All new employees sign confidentiality agreements as a
condition of employment with us. Furthermore, we require that
employees handling extremely sensitive information meet additional
security conditions further protecting the use of data. We discipline
or terminate employees who violate or fail to report violations of our
Privacy Policy.
HOW YOU CAN PROTECT YOURSELF
As a consumer, you have the right to remove yourself from compiled direct
marketing lists. Send your request to remove your name and address from
such registers directly to the Direct Marketing Association at:
http://www.the-dma.org.
HOW WE USE OUR DATA
IntelliQuest uses identifiers and marketing surveys to help gather consumer
information and to allow consumers to receive advertising and affinity
offers tailored to their interests. These identifiers or "cookies" are
small data structures that help Web sites pinpoint information about users
to determine their preferences. These preferences are determined using
existing third-party commercial marketing information and are in no way
based on monitoring how the consumer uses the Internet. Cookies provide
consumers with many advantages, including improved customer service and
other marketing benefits. Nevertheless, we respect the right of a consumer
to refuse cookies by modifying their cookie preference in their browser
window.
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By using this information in these ways, technology clients are able to
provide better products and services to their customers. Because this
information is often a critical success factor for our clients, it is
critical that the information be accurate and ethically obtained.
To that end, IntelliQuest pledges to make every effort to determine the
source of any data errors brought to our attention. If the error
originates with us, we will correct it. If the error originates with a
third party, we will immediately notify the provider of that data.
We require a commitment from our clients that any data sent to us has been
legally and ethically obtained and that in the use of any data received
from us, our clients will comply with all data protection laws and
applicable industry policies. Our contracts with third-party information
providers contain a commitment that the data provided to us has been
legally obtained for the uses described above.
If we determine that a client or an information provider is not in
compliance with these commitments, we will terminate our relationship with
them.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3 Amended and Restated By-laws
11.1 Statement Regarding Computation of Net Income Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
None
24
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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 November 13, 1998
IntelliQuest Information Group, Inc.
(Registrant)
By: /s/ Ed Frazier
---------------------------------
Ed Frazier
Chief Operating Officer
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AMENDED AND RESTATED BYLAWS
OF
INTELLIQUEST INFORMATION GROUP, INC.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1. STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1. ANNUAL MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. SPECIAL MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3. NOTICE OF MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4. ADJOURNMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5. QUORUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6. ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7. VOTING PROXIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.8. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD . . . . . . . 4
1.9. LIST OF STOCKHOLDERS ENTITLED TO VOTE . . . . . . . . . . . . . . . . 5
ARTICLE 2. BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . 5
2.1. NUMBER OF QUALIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . 5
2.2. ELECTION RESIGNATION; REMOVAL; VACANCIES . . . . . . . . . . . . . . 5
2.3. REGULAR MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4. SPECIAL MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.5. TELEPHONIC MEETINGS PERMITTED . . . . . . . . . . . . . . . . . . . . 7
2.6. QUORUM; VOTE REQUIRED FOR ACTION. . . . . . . . . . . . . . . . . . . 7
2.7. ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.8. INFORMAL ACTION BY DIRECTORS. . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 3. COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1. COMMITTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2. COMMITTEE RULES . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 4. OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1. EXECUTIVE OFFICERS; ELECTION QUALIFICATIONS; TERM OF OFFICE;
RESIGNATION; REMOVAL; VACANCIES . . . . . . . . . . . . . . . . . . . 8
4.2. POWERS AND DUTIES OF EXECUTIVE OFFICERS . . . . . . . . . . . . . . . 8
ARTICLE 5. STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.1. CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2. LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF NEW
CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 6. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1. RIGHT TO INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . 9
6.2. PREPAYMENT OF EXPENSES. . . . . . . . . . . . . . . . . . . . . . . .10
6.3. CLAIMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
6.4. NON-EXCLUSIVITY OF RIGHTS . . . . . . . . . . . . . . . . . . . . . .10
6.5. OTHER INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . .10
6.6. AMENDMENT OR REPEAL . . . . . . . . . . . . . . . . . . . . . . . . .10
ARTICLE 7. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . .10
7.1. FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
7.2. SEAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
7.3. WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND
COMMITTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
7.4. INTERESTED DIRECTORS; QUORUM. . . . . . . . . . . . . . . . . . . . .11
7.5. FORM OF RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . .11
7.6. AMENDMENT OF BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . .12
</TABLE>
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ARTICLE 1.
STOCKHOLDERS
1.1. ANNUAL MEETINGS
An annual meeting of stockholders shall be held for the election of
directors at such date, time and place, either within or without the State of
Delaware, as may be designated by resolution of the Board of Directors from
time to time. At an annual meeting of stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before the annual meeting, business must be either (i)
specified in the notice of annual meeting (or any supplement or amendment
thereto) given by or at the direction of the Board of Directors, (ii)
otherwise brought before the annual meeting by or at the direction of the
Board of Directors, or (iii) otherwise brought before the annual meeting by a
stockholder. In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the
Secretary. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation,
not less than fifty (50) days nor more than seventy-five (75) days prior to
the meeting's originally scheduled date (the date an adjourned meeting is
reconvened will in no event be considered a meeting's "originally scheduled
date"); provided, however, that in the event that less than sixty-five (65)
days' notice or prior public disclosure of the date of the annual meeting is
given or made to stockholders, notice by a stockholder to be timely must be
so received not later than the close of business on the fifteenth (15th) day
following the day on which such notice of the date of annual meeting was
mailed or such public disclosure was made, whichever first occurs. A
stockholders' notice to the Secretary shall set forth as to each matter the
stockholder proposes to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and record
address of the stockholder proposing such business, (iii) the class, series
and number of shares of the capital stock of the Corporation which are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business. Notwithstanding anything in these Bylaws to
the contrary, no business shall be conducted at the annual meeting except in
accordance with the procedures set forth in this Section 1.1 The officer of
the Corporation presiding at an annual meeting shall, if the facts warrant,
determine and declare to the annual meeting that business was not properly
brought before the annual meeting in accordance with the provisions of this
Section 1.1, and if he should so determine, he shall so declare to the annual
meeting and any such business not properly brought before the meeting shall
not be transacted.
1.2. SPECIAL MEETINGS
Special meetings of stockholders for any purpose or purposes may be
called at any time by the Board of Directors, or by a committee of the Board
of Directors which has been duly designated by the Board of Directors and
whose powers and authority, as expressly provided in a resolution of the
Board of Directors, include the power to call such meetings, but such special
meetings may not be called by any other person or persons.
2
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1.3. NOTICE OF MEETINGS
Whenever stockholders are required or permitted to take any action at a
meeting, a written notice of the meeting shall be given which shall state the
place, date and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Unless otherwise
provided by law, the certificate of incorporation or these Bylaws, the
written notice of any meeting shall be given not less than ten (10) nor more
than sixty (60) days before the date of the meeting to each stockholder
entitled to vote at such meeting. If mailed, such notice shall be deemed to
be given when deposited in the mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation.
1.4. ADJOURNMENTS
Any meeting of stockholders, annual or special, may adjourn from time to
time to reconvene at the same or some other place, and notice need not be
given of any such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than
thirty (30) days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
1.5. QUORUM
Except as otherwise provided by law, the certificate of incorporation or
these Bylaws, at each meeting of stockholders the presence in person or by
proxy of the holders of shares of stock having a majority of the votes which
could be cast by the holders of all outstanding shares of stock entitled to
vote at the meeting shall be necessary and sufficient to constitute a quorum.
In the absence of a quorum, the stockholders so present may, by majority
vote, adjourn the meeting from time to time in the manner provided in Section
1.4 of these Bylaws until a quorum shall attend. Shares of its own stock
belonging to the corporation or to another corporation, if a majority of the
shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the corporation, shall
neither be entitled to vote nor be counted for quorum purposes; provided,
however, that the foregoing shall not limit the right of the corporation to
vote stock, including but not limited to its own stock, held by it in a
fiduciary capacity.
1.6. ORGANIZATION
Meetings of stockholders shall be presided over by the Chairman of the
Board, if any, or in his absence by the Vice Chairman of the Board, if any,
or in his absence by the President, or in his absence by a Vice President, or
in the absence of the foregoing persons by a chairman designated by the Board
of Directors, or in the absence of such designation by a chairman chosen at
the meeting. The Secretary shall act as secretary of the meeting, but in his
absence the chairman of the meeting may appoint any person to act as
secretary of the meeting.
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1.7. VOTING; PROXIES
Except as otherwise provided by the certificate of incorporation, each
stockholder entitled to vote at any meeting of stockholders shall be entitled
to one (1) vote for each share of stock held by him which has voting power
upon the matter in question. Voting at meetings of stockholders need not be
by written ballot and need not be conducted by inspectors of election unless
so determined by the holders of a majority of the stock having voting power
present in person or by proxy at such meeting. At all meetings of
stockholders for the election of directors a plurality of the votes cast
shall be sufficient to elect. All other elections and questions shall,
unless otherwise provided by law, the certificate of incorporation or these
Bylaws, be decided by the vote of the holders of a majority of the stock
having voting power present in person or represented by proxy at the meeting.
Shares represented by proxies that reflect, with respect to a proposal,
abstentions or limited voting authority, including "broker non-votes" (I.E.,
shares held by a broker or nominee which are represented at the meeting, but
with respect to which such broker or nominee is not empowered to vote on a
particular proposal) shall be counted as shares that are present and entitled
to vote for purposes of determining the presence of a quorum. For purposes
of determining the outcome of any proposal, shares represented by such
proxies will be treated as not entitled to vote with respect to the proposal
or proposals.
Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three (3) years from its date,
unless the proxy provides for a longer period. A duly executed proxy shall
be irrevocable if it states that it is irrevocable and if, and only as long
as, it is coupled with an interest sufficient in law to support an
irrevocable power. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy
bearing a later date with the Secretary of the corporation. All proxies must
be filed with the Secretary at the beginning of each meeting in order to be
counted in any vote at the meeting.
1.8. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record
date is adopted by the Board of Directors and which record date: (1) in the
case of determination of stockholders entitled to vote at any meeting of
stockholders or adjournment thereof, shall, unless otherwise required by law,
not be more than sixty nor less than ten days before the date of such
meeting; and (2) in the case of any other action, shall not be more than
sixty days prior to such other action. If no record date is fixed: (1) the
record date for determining stockholders entitled to notice of or to vote at
a meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; and (2) the record date for determining stockholders for any other
4
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purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
1.9. LIST OF STOCKHOLDERS ENTITLED TO VOTE
The Secretary shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during, ordinary business hours, for
a period of at least ten days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in
the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof and may be inspected
by any stockholder who is present. Upon the willful neglect or refusal of
the directors to produce such a list at any meeting for the election of
directors, they shall be ineligible for election to any office at such
meeting. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of stockholders
or the books of the corporation, or to vote in person or by proxy at any
meeting of stockholders.
ARTICLE 2.
BOARD OF DIRECTORS
2.1. NUMBER OF QUALIFICATIONS
The Board of Directors shall consist of one or more members, the number
thereof to be determined from time to time by resolution of the Board of
Directors. Directors need not be stockholders.
2.2. ELECTION RESIGNATION; REMOVAL; VACANCIES
The Board of Directors shall initially consist of the persons named as
directors in the certificate of incorporation, and each director so elected
shall hold office until the first annual meeting of stockholders or until his
successor is elected and qualified. At the first annual meeting of
stockholders and at each annual meeting thereafter, the stockholders shall
elect directors each of whom shall hold office for a term of one year or
until his successor is elected and qualified. Only persons who are nominated
in accordance with the following procedures shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of
the Corporation at the annual meeting may be made by or at the direction of
the Board of Directors, by any committee of persons appointed by the Board of
Directors or at the meeting by any stockholder of the Corporation entitled to
vote for the election of directors who complies with the notice procedures
set forth in this Section 2.2 Such nominations by any stockholder shall be
made pursuant to timely notice in writing to the Secretary of the
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Corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than fifty (50) days nor more than seventy-five (75) days prior to the
meeting's originally scheduled date (the date an adjourned meeting is
reconvened will in no event be considered a meeting's "originally scheduled
date"); provided, however, that in the event that less than sixty-five (65)
days' notice or prior public disclosure of the date of the meeting is given
or made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the fifteenth (15th) day
following the day on which such notice of the date of the meeting was mailed
or such public disclosure was made, whichever first occurs. Such
stockholder's notice to the Secretary shall set forth (i) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director, (a) the name, age, business address and residence address of the
person, (b) the principal occupation or employment of the person, (c) the
class and number of shares of capital stock of the Corporation which are
beneficially owned by the person and (d) any other information relating to
the person that is required to be disclosed in solicitations for proxies for
elections of directors pursuant to the Rules and Regulations of the
Securities and Exchange Commission under Section 14 of the Securities
Exchange Act of 1934, as amended; and (ii) as to the stockholder giving the
notice (a) the name and record address of the stockholder and (b) the class
and number of shares of capital stock of the Corporation which are
beneficially owned by the stockholder. The Corporation may require any
proposed nominee to furnish such other information as may reasonably be
required by the Corporation to determine the eligibility of such proposed
nominee to serve as a director of the Corporation. No person shall be
eligible for election as a director of the Corporation unless nominated in
accordance with the procedures set forth herein. The officer of the
Corporation presiding at any annual meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded.
Any director may resign at any time upon written notice to the
corporation. Any newly created directorship or any vacancy occurring in the
Board of Directors for any cause may be filled only by a majority of the
remaining members of the Board of Directors, although such majority is less
than a quorum, or by a sole remaining director. If there are no directors
in office, then an election of directors may be held in the manner provided
by statute. Each director so elected shall hold office until the expiration
of the term of office of the director whom he has replaced or until his
successor is elected and qualified.
2.3. REGULAR MEETINGS
Regular meetings of the Board of Directors may be held at such places
within or without the State of Delaware and at such times as the Board of
Directors may from time to time determine, and if so determined notices
thereof need not be given.
2.4. SPECIAL MEETINGS
Special meetings of the Board of Directors may be held at any time or
place within or without the State of Delaware whenever called by the
President, and Vice President, the
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Secretary, or by any member of the Board of Directors. Notice of a special
meeting of the Board of Directors shall be given by the person or persons
calling the meeting at least twenty four (24) hours before the special
meeting.
2.5. TELEPHONIC MEETINGS PERMITTED
Members of the Board of Directors, or any committee designated by the
Board of Directors, may participate in a meeting thereof by means of
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this Bylaw shall constitute presence
in person at such meeting.
2.6. QUORUM; VOTE REQUIRED FOR ACTION
At all meetings of the Board of Directors a majority of the whole Board
of Directors shall constitute a quorum for the transaction of business.
Except in cases in which the certificate of incorporation or these Bylaws
otherwise provide, the vote of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of
Directors.
2.7. ORGANIZATION
Meetings of the Board of Directors shall be presided over by the
Chairman of the Board, if any, or in his absence by the Vice Chairman of the
Board, if any, or in his absence by the President, or in their absence by a
chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may appoint any
person to act as secretary of the meeting.
2.8. INFORMAL ACTION BY DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken without a
meeting if all members of the Board of Directors or such committee, as the
case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors or such
committee.
ARTICLE 3.
COMMITTEES
3.1. COMMITTEES
The Board of Directors may, by resolution passed by a majority of the
whole Board of Directors, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of the
committee, the
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member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in
place of any such absent or disqualified member. Any such committee, to the
extent permitted by law and to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority
of the Board of Directors in the management of the business and affairs of
the corporation, and may authorize the seal of the corporation to be affixed
to all papers which may require it.
3.2. COMMITTEE RULES
Unless the Board of Directors otherwise provides, each committee
designated by the Board of Directors may make, alter and repeal rules for the
conduct of its business. In the absence of such rules each committee shall
conduct its business in the same manner as the Board of Directors conducts
its business pursuant to Article 3 of these Bylaws.
ARTICLE 4.
OFFICERS
4.1. EXECUTIVE OFFICERS; ELECTION QUALIFICATIONS; TERM OF OFFICE;
RESIGNATION; REMOVAL; VACANCIES
The Board of Directors shall elect a President and Secretary and it may,
if it so determines, choose a Chairman of the Board and a Vice Chairman of
the Board from among its members. The Board of Directors may also choose one
or more Vice Presidents, one or more Assistant Secretaries, a Treasurer and
one or more Assistant Treasurers. Each such officer shall hold office until
the first meeting of the Board of Directors after the annual meeting of
stockholders next succeeding his election, and until his successor is elected
and qualified or until his earlier resignation or removal. Any officer may
resign at any time upon written notice to the corporation. The Board of
Directors may remove any officer with or without cause at any time, but such
removal shall be without prejudice to the contractual rights of such officer,
if any, with the corporation. Any number of offices may be held by the same
person. Any vacancy occurring in any office of the corporation by death,
resignation, removal or otherwise may be filled for the unexpired portion of
the term by the Board of Directors at any regular or special meeting.
4.2. POWERS AND DUTIES OF EXECUTIVE OFFICERS
The officers of the corporation shall have such powers and duties in the
management of the corporation as may be prescribed by the Board of Directors
and, to the extent not so provided, as generally pertain to their respective
offices subject to the control of the Board of Directors. The Board of
Directors may require any officer, agent or employee to give security for the
faithful performance of his duties.
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ARTICLE 5.
STOCK
5.1. CERTIFICATES
Every holder of stock shall be entitled to have a certificate signed by
or in the name of the corporation by the Chairman or Vice Chairman of the
Board of Directors, if any, or the President or Vice President, and by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary, of the corporation, certifying the number of shares owned by him
in the corporation. Any of or all the signatures on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer, transfer agent, or registrar at the date
of issue.
5.2. LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF NEW
CERTIFICATES
The corporation may issued a new certificate of stock in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the corporation may require the owner of the lost, stolen
or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any
such certificate or the issuance of such new certificate.
ARTICLE 6.
INDEMNIFICATION
6.1. RIGHT TO INDEMNIFICATION
The corporation shall indemnify and hold harmless, to the fullest extent
permitted by applicable law as is presently exists or may hereafter be
amended, any person who was or is made or is threatened to be made a party or
is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "proceeding") by reason of the
fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses
reasonably incurred by such person. The corporation shall be required to
indemnify a person in connection with a proceeding initiated by such person
only if the proceeding was authorized by the Board of Directors of the
corporation.
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6.2. PREPAYMENT OF EXPENSES
The corporation shall pay the expenses incurred in defending any
proceeding in advance of its final disposition; provided, however, that the
payment of expenses incurred by a director or officer in advance of the final
disposition of the proceeding shall be made only upon receipt of an
undertaking by the director or officer to repay all amounts advanced if it
should be ultimately determined that the director or officer is not entitled
to be indemnified under this Article or otherwise.
6.3. CLAIMS
If a claim for indemnification or payment of expenses under this Article
is not paid in fall, within sixty days after a written claim therefor has
been received by the corporation the claimant may file suit to recover the
unpaid amount of such claim and, if successful in whole or in part, shall be
entitled to be paid the expense of prosecuting such claim. In any such
action the corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification or payment of expenses under
applicable law.
6.4. NON-EXCLUSIVITY OF RIGHTS
The rights conferred on any person by this Article 6 shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the certificate of incorporation, these
Bylaws, agreement, vote of stockholders or disinterested directors or
otherwise.
6.5. OTHER INDEMNIFICATION
The corporation's obligation, if any, to indemnify any person who was or
is serving at its request as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, enterprise or non
profit entity shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture,
trust, enterprise or non profit enterprise.
6.6. AMENDMENT OR REPEAL
Any repeal or modification of the foregoing provisions of this Article 6
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
ARTICLE 7.
MISCELLANEOUS
7.1. FISCAL YEAR
The fiscal year of the corporation shall be determined by resolution of
the Board of Directors.
10
<PAGE>
7.2. SEAL
The corporate seal shall have the name of the corporation inscribed thereon
and shall be in such form as may be approved from time to time by the Board of
Directors.
7.3. WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND
COMMITTEES
Any written waiver of notice, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent
to notice. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
7.4. INTERESTED DIRECTORS; QUORUM
No contract or transaction between the corporation and one or more of
its directors or officers, or between the corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because his or their votes are counted for
such purpose, if (1) the material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of
a majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or (2) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed
or are known to the stockholders entitled to vote thereon, and the contract
or transaction is specifically approved in good faith by vote of the
stockholders; or (3) the contract or transaction is fair as to the
corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof, or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum
at a meeting of the Board of Directors or of a Committee which authorizes the
contract or transaction.
7.5. FORM OF RECORDS
Any records maintained by the corporation in the regular course of its
business, including its stock ledger, books of account and minute books, may
be kept on, or be in the form of any information storage device, provided
that the records so kept can be converted into clearly legible form within a
reasonable time. The corporation shall so convert any records so kept upon
the request of any person entitled to inspect the same.
11
<PAGE>
7.6. AMENDMENT OF BYLAWS
These Bylaws may be altered or repealed and new bylaws made by the Board
of Directors, but the stockholders may make additional bylaws and may alter
and repeal any bylaws whether adopted by them or otherwise.
12
<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 Nine Months Ended
September 30, 1998
---------------------------------------
Weighted
Average
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ----------
<S> <C> <C> <C>
Basic EPS
Net income available to common
stockholders $ 701 8,307 $ .08
--------
--------
Effect of Dilutive Securities
Options 46
-------- -------
Diluted EPS $ 701 8,353 $ .08
-------- ------- --------
-------- ------- --------
For the Three Months Ended
September 30, 1997
---------------------------------------
Weighted
Average
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ----------
<S> <C> <C> <C>
Basic EPS
Net income available to common
stockholders $ 1,382 8,390 $ .16
--------
--------
Effect of Dilutive Securities
Options 197
-------- -------
Diluted EPS $ 1,382 8,587 $ .16
-------- ------- --------
-------- ------- --------
</TABLE>
27
<PAGE>
INTELLIQUEST INFORMATION GROUP, INC.
STATEMENT REGARDING COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the Three Months Ended
September 30, 1998
---------------------------------------
Weighted
Average
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ----------
<S> <C> <C> <C>
Basic EPS
Net loss available to common
stockholders $ (1,935) 8,413 $ (.23)
--------
--------
Effect of Dilutive Securities
Options (A)
-------- -------
Diluted EPS $ (1,935) 8,413 $ (.23)
-------- ------- --------
-------- ------- --------
For the Nine Months Ended
September 30, 1997
---------------------------------------
Weighted
Average
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ----------
<S> <C> <C> <C>
Basic EPS
Net income available to common
Stockholders $ 2,779 8,308 $ .33
--------
--------
Effect of Dilutive Securities
Options 169
-------- -------
Diluted EPS $ 2,779 8,477 $ .33
-------- ------- --------
-------- ------- --------
</TABLE>
(A) Due to the net loss in the nine months ended September 30, 1998, diluted
weighted average shares excludes the effect of dilutive securities.
28
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1998 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,736
<SECURITIES> 33,997
<RECEIVABLES> 11,322
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 54,600
<PP&E> 2,577
<DEPRECIATION> 0
<TOTAL-ASSETS> 66,081
<CURRENT-LIABILITIES> 9,522
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 56,446
<TOTAL-LIABILITY-AND-EQUITY> 66,081
<SALES> 33,790
<TOTAL-REVENUES> 33,790
<CGS> 18,599
<TOTAL-COSTS> 18,599
<OTHER-EXPENSES> 20,264
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,987)
<INCOME-TAX> (2,052)
<INCOME-CONTINUING> (1,935)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,935)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
</TABLE>
