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U.S. 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 quarterly period ended March 31, 1997
( ) 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 0-9111-99
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DBT ONLINE, INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania 85-0439411
- --------------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
5550 W. Flamingo Road, Suite B-5
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(Address of principal Executive Offices)
Las Vegas, Nevada 89103
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(702) 257-1112
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the preceding 12
months (or for such shorter periods 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
--- ---
The number of common shares outstanding as of April 23, 1997 was 7,750,818.
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DBT ONLINE, INC.
TABLE OF CONTENTS
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Page
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PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 1997
and December 31, 1996..................................................................3
Consolidated Statements of Operations for the Three Months Ended March 31, 1997
and 1996...............................................................................4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1997 and 1996..........................................................5
Notes to Consolidated Financial Statements......................................................6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................................................7
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS..............................................................................10
Item 2. CHANGES IN SECURITIES..........................................................................10
Item 3. DEFAULTS UPON SENIOR SECURITIES................................................................10
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS............................................10
Item 5. OTHER INFORMATION..............................................................................10
Item 6. EXHIBITS AND REPORTS ON FORM 8-K...............................................................10
Signature........................................................................................................11
EXHIBIT
Exhibit 27.1 Financial Data Schedule..............................................................E-1
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
DBT ONLINE, INC. and subsidiaries
CONSOLIDATED BALANCE SHEETS
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March 31, December 31,
ASSETS 1997 1996
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(Unaudited)
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Current assets:
Cash and cash equivalents $ 4,614,500 $ 6,965,600
Accounts receivable, less allowance:
March 31, 1997-$260,500; December 31, 1996-$250,000 3,531,800 2,397,600
Prepaid expenses and other current assets 441,100 375,100
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Total current assets 8,587,400 9,738,300
Property and equipment, net 6,395,300 6,064,300
Patents, less amortization:
March 31, 1997-$1,046,100; December 31, 1996-$622,300 12,796,700 13,220,500
Other assets 709,600 532,900
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Total assets $28,489,000 $ 29,556,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 2,834,600 $ 1,653,200
Current portion of long-term debt 1,415,500
Bank line-of-credit 200,000
Due to other patent interest holders 1,385,200 1,411,300
Income taxes payable 481,600 618,200
Customer deposits 348,600 322,300
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Total current liabilities 5,050,000 5,620,500
Long-term debt, less current portion 1,365,800
Deferred income taxes 4,317,800 4,339,200
Stockholders' equity:
Preferred stock, $.10 par value
5,000,000 shares authorized; no shares issued or outstanding -- --
Common stock, $.10 par value 40,000,000
shares authorized; 7,750,818 shares
and 7,723,806 shares issued and outstanding
at March 31, 1997 and December 31,1996, respectively 775,100 772,400
Additional paid in capital 18,210,000 18,212,700
Retained earnings (deficit) 136,100 (754,600)
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Total stockholders' equity 19,121,200 18,230,500
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Total liabilities and stockholders' equity $28,489,000 $ 29,556,000
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</TABLE>
See notes to consolidated financial statements.
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DBT ONLINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
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(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $6,081,500 $ 3,349,800
Patent royalties 1,517,500
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Total revenues and royalties 7,599,000 3,349,800
Cost of revenues 3,270,700 1,552,500
Selling and promotion 593,000 315,900
Research and development 529,700 398,500
General and administrative 1,800,300 767,100
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Total expenses 6,193,700 3,034,000
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Income from operations 1,405,300 315,800
Interest income (expense), net 31,300 (35,400)
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Income before income taxes 1,436,600 280,400
Provision for income taxes 545,900 105,500
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Net income $ 890,700 $ 174,900
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Net income per common share $ 0.11 $ 0.03
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Weighted average shares outstanding 8,053,000 5,127,600
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</TABLE>
See notes to consolidated financial statements.
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DBT ONLINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
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<CAPTION>
Three Months Ended March 31,
1997 1996
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(Unaudited) (Unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 890,700 $ 174,900
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,127,500 399,200
Deferred taxes (21,400) (21,300)
Changes in operating assets and liabilities:
Accounts receivable (1,134,200) (389,900)
Prepaid expenses and other current assets (66,000) (23,500)
Accounts payable and accrued liabilities 1,181,400 80,700
Due to other patent interest holders (26,100)
Income taxes payable (136,600)
Customer deposits 26,300 23,200
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Net cash provided by operating activities 1,841,600 243,300
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment purchased (1,004,100) (1,010,700)
Increase in deposits, and other (207,300) (82,600)
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Net cash used in investing activies (1,211,400) (1,093,300)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in bank line-of-credit (200,000) 500,000
Repayments on long-term debt (2,781,300) (278,500)
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Net cash (used in) provided by financing activities (2,981,300) 221,500
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NET DECREASE IN CASH AND
CASH EQUIVALENTS (2,351,100) (628,500)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,965,600 1,642,700
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,614,500 $ 1,014,200
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</TABLE>
See notes to consolidated financial statements.
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DBT ONLINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto, which are included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
NOTE 1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of DBT Online, Inc. (the "Company") and its wholly-owned subsidiaries, Database
Technologies, Inc., a Florida corporation ("DBT") and Patlex Corporation (since
August 20,1996, date of merger), a Pennsylvania corporation ("Patlex"). The
interim consolidated financial statements as of March 31,1997 and for the three
months ended March 31, 1997 and 1996 are unaudited. All significant intercompany
accounts and transactions have been eliminated. The accompanying consolidated
financial statements reflect all adjustments which are, in the opinion of
management, necessary for a fair presentation of the financial position, results
of operations and cash flows for the interim periods presented. Such adjustments
consist solely of normal recurring accruals. Results for the interim periods are
not necessarily indicative of results for a full year.
NOTE 2. PRO FORMA INFORMATION
On August 20, 1996, the former shareholders of Patlex approved a plan
of reorganization pursuant to which the Company was reorganized into a holding
company structure and each share of Patlex was converted into a share of the
Company. Also on August 20, 1996, a wholly-owned subsidiary of the Company
merged with DBT. Pursuant to the terms of the merger and reorganization, the
former shareholders of Patlex own approximately 33.2% of the Company and the
former owners of DBT own 66.8% of the Company, based on the shares and options
outstanding at August 20, 1996. For accounting purposes, the transaction is
treated as a purchase of Patlex with DBT as the accounting acquirer.
If the merger and reorganization had been completed on January 1, 1996,
pro forma results for the three months ended March 31, 1996 would be as follows
(the pro forma information is not necessarily indicative of the combined results
of operations that would have occurred had the merger and reorganization been
completed as of January 1, 1996):
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Revenues $5,159,800
Net Income $534,600
Net Income Per Common Share $0.07
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following should be read in conjunction with the Consolidated
Financial Statements of the Company and the Notes thereto. This information
contains certain statements regarding future trends, the accuracy of which is
subject to many risks and uncertainties. Such trends, and their anticipated
impact upon the Company, could differ materially from those presented in this
Form 10-Q.
OVERVIEW OF THE COMPANY AND 1996 REORGANIZATION
The Company is a holding company with two wholly-owned operating
subsidiaries, DBT and Patlex, which are respectively engaged in the provision of
on-line integrated database services and the patent exploitation and enforcement
business. The Company was reorganized into its current structure on August 20,
1996.
On August 20, 1996, the shareholders of Patlex approved a Plan of
Reorganization pursuant to which the Company was reorganized into a holding
company and Patlex became a wholly-owned subsidiary of the Company. Also on
August 20, 1996, another wholly-owned subsidiary of the Company merged with and
into DBT and DBT became a wholly-owned subsidiary of the Company (the "Merger").
The Company is the successor registrant to Patlex.
For accounting purposes the Merger was treated as a purchase business
acquisition of Patlex by DBT (a reverse acquisition) and a recapitalization of
DBT. Assets and liabilities of Patlex acquired in the Merger were recorded at
their fair value as of August 20, 1996.
REVENUES
The Company's revenues increased 127% to $7,599,000 for the three
months ended March 31, 1997 from $3,349,800 for the same period in 1996. DBT
contributed $6,081,500 to the Company's revenues and Patlex contributed
$1,517,500 to the Company's revenues.
The increase in DBT's revenues was attributable to an increase in the
number of active customers and the number of minutes users spent on line. DBT's
active customers (defined as customers accessing the system in a given month)
increased 95% to 7,800 at March 31, 1997 from 4,000 at March 31, 1996.
Total system usage was 4.4 million minutes for the three months ended
March 31, 1997, up from 2.3 million minutes for the same period in 1996, an
increase of 91%. Revenues from on-line charges were $5,838,100 and $3,152,500
for the three months ended March 31, 1997 and 1996, respectively, an increase of
85%.
COST OF REVENUES
The Company's cost of revenues increased 111% to $3,270,700 for the
three months ended March 31, 1997 from $1,552,500 for the same period in 1996.
As a percentage of total revenues, cost of revenues decreased to 43% for the
three months ended March 31, 1997 from 46% for the same period in 1996. For the
three months ended March 31, 1997, Patlex's cost of revenues, which consisted
solely of the amortization of its patents, was $423,800. In addition to the
consolidation of Patlex, the increase in the Company's cost of revenues was due
primarily to increases in both purchased data costs and depreciation expense as
DBT continued to invest both in its computer facilities and in the expansion of
its databases. The Company expects this trend to continue.
SELLING AND PROMOTION EXPENSES
DBT's selling and promotion expenses increased 88% to $593,000 for the
three months ended March 31, 1997 from $315,900 for the same period in 1996. The
increase was primarily due to increases in payroll and trade show expenses. As a
percentage of total revenues, selling and promotion expenses decreased to 7.8%
for the three months ended March 31, 1997 from 9.4%, for the same period in
1996.
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RESEARCH AND DEVELOPMENT EXPENSES
DBT's research and development expenses increased 33% to $529,700 for
the three months ended March 31, 1997 from $398,500 for the same period in 1996.
This increase was caused by an increase in payroll and related expenses. As a
percentage of total revenues, research and development expenses were 7.0% for
the three months ended March 31, 1997, a decrease from 11.9% for the same period
in 1996.
GENERAL AND ADMINISTRATIVE EXPENSES
DBT's general and administrative expenses increased 135% to $1,800,300
for the three months ended March 31, 1997 from $767,100 for the same period in
1996. This increase was due to increases in payroll and related expenses. As a
percentage of total revenues, general and administrative expenses remained
relatively consistent at 23.7% and 22.9% for the three months ended March 31,
1997 and 1996, respectively. Patlex's general and administrative expenses, which
consisted principally of salaries, were $254,500 for the three months ended
March 31, 1997. The Company's corporate expenses, which consisted principally of
corporate insurance, public company related expenses and legal fees, were
$99,400.
INTEREST INCOME (EXPENSE), NET
Net interest income was $31,300 for the three months ended March 31,
1997 compared to interest expense of $35,400 for the same period in 1996. The
net interest income is due to the Company's repayment of all its outstanding
debt in the first quarter of 1997 and its positive cash flow from operations.
INCOME TAXES
The Company's effective income tax rate was 38% for the three months
ended March 31, 1997 compared to 37.6% for the same period in 1996.
NET INCOME
The Company had net income of $890,700 for the three months ended March
31, 1997 compared to $174,900 for the same period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow from operations was $1,841,600 and $243,300 for
the three months ended March 31, 1997 and 1996, respectively. The Company's
capital expenditures of $1,004,100 and $1,010,700 for the three months ended
1997 and 1996, respectively, were primarily attributable to the acquisition of
computer equipment for DBT. The Company had working capital at March 31, 1997 of
$3,537,400 (including cash and cash equivalents of $4,614,500) compared to
$4,117,800 (including cash and cash equivalents of $6,965,600) at December 31,
1996. The decrease in working capital at March 31, 1997 was principally due to
the repayment by the Company during the first quarter of 1997 of its debt, which
had an outstanding balance of $2,981,300 at December 31, 1996.
The Company expects to fund future working capital requirements from
its existing cash balances and cash generated from operations. If necessary,
other sources of capital available to the Company may include access to the
capital markets, additional bank borrowings and lines of credit.
INFLATION
The rate of inflation has not had a material impact on the operations
of the Company. Moreover, if inflation remains at its recent levels, it is not
expected to have a material impact on the operations of the Company for the
foreseeable future.
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Information contained above with respect to the Company's investment in
its computer facilities and the expansion of its databases, and other statements
in this Management's Discussion and Analysis of Financial Condition and Results
of Operations, regarding expected future events and financial results are
forward-looking and subject to risks and uncertainties. Those statements are
forward-looking statements within the meaning of Section 31E of the Securities
Exchange Act of 1934. The following important factors could affect the future
results of the Company and could cause those results to differ materially from
those expressed in the forward-looking statements: (i) the ability to manage
DBT's rapid expansion, (ii) the ability of DBT to protect its proprietary
technology, (iii) the impact of future government regulation on the
availability of public records, and (iv) the extent, timing and success of
competition from other database providers.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None to report.
ITEM 2. CHANGES IN SECURITIES
None to report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None to report.
ITEM 5. OTHER INFORMATION
None to report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1* Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K dated February 18, 1997, was filed with the
Securities and Exchange Commission on February 20, 1997,
reporting under Item 4 the change in the Company's certifying
accountant from Ernst & Young LLP to Deloitte & Touche LLP.
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* Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DBT ONLINE, INC.
/s/ TIMOTHY M. LEONARD
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TIMOTHY M. LEONARD
Vice President, Finance, Treasurer and Chief
Financial Officer
(Duly authorized officer and principal
financial officer)
Date: April 30, 1997
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF DBT ONLINE, INC. FOR THE 3 MONTH PERIOD ENDED MARCH 31,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 4,614,500
<SECURITIES> 0
<RECEIVABLES> 3,792,300
<ALLOWANCES> 260,500
<INVENTORY> 0
<CURRENT-ASSETS> 8,587,400
<PP&E> 6,395,300
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,489,000
<CURRENT-LIABILITIES> 5,050,000
<BONDS> 0
0
0
<COMMON> 775,100
<OTHER-SE> 18,346,100
<TOTAL-LIABILITY-AND-EQUITY> 28,489,000
<SALES> 6,081,500
<TOTAL-REVENUES> 7,599,000
<CGS> 3,270,700
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,923,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (31,300)
<INCOME-PRETAX> 1,436,600
<INCOME-TAX> 545,900
<INCOME-CONTINUING> 890,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 890,700
<EPS-PRIMARY> .11
<EPS-DILUTED> 0
</TABLE>
