<PAGE>
U.S. SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
Commission File Number 0-22351
FirstQuote Inc.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 98-0162893
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12, Ave des Morgines, 1213 Petit-Lancy 1, Geneva, Switzerland N/A
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(Address of principal executive offices) (Zip Code)
+41-22-879-0879
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(Issuer's telephone number)
(not applicable)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
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[_]
As of November 7, 2000 the Registrant had 13,414,466 shares of its common stock,
par value $0.001, issued and outstanding.
Transitional Small Business Disclosure Format: Yes [_] No [X]
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
FIRSTQUOTE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
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(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $2,944,303 $1,093,630
Trade accounts receivable net 1,148,829 616,168
Prepaid expenses 390,809 486,385
Other current assets 421,874 324,223
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Total current assets 4,905,815 2,520,406
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NON-CURRENT ASSETS
Property and equipment, net 2,184,201 1,525,400
Goodwill, net 2,474,998 3,307,110
Other assets 4,253 8,699
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Total non-current assets 4,663,452 4,841,209
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Total Assets $9,569,267 $7,361,615
============= ============
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
<PAGE>
FIRSTQUOTE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(cont.)
September 30, December 31,
2000 1999
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(Unaudited) (Audited)
LIABILITES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 2,313,543 $ 1,547,028
Accrued expenses 1,553,657 816,362
Current portion of capital lease
obligations 71,235 142,626
Deferred income 1,140,410 895,747
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Total current liabilities 5,078,845 3,401,763
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LONG-TERM CAPITAL LEASE OBLIGATIONS
Capital lease obligations, net of
current portion 10,211 29,177
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STOCKHOLDERS' EQUITY
Preferred Stock, $0.001 par value,
10,000,000 shares authorized;
Class A: 0 and 6,500 shares
issued and outstanding -- 7
Outstanding -- 1,924
Class C: 0 and 3,783,784 shares
issued and outstanding -- 3,784
Class D: 197,815 shares issued
and outstanding 198 198
Common Stock. $0.00 1 par value,
13,414,466 and 6,423,409 shares
issued and outstanding 13,415 6,423
Additional paid in capital 24,255,654 16,703,758
Cumulative translation adjustment 1,688,815 989,475
Accumulated deficit (21,477,871) (13,683894)
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Total stockholders' equity 4,480,211 3,930,675
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Total Liabilities and
Stockholders' Equity $ 9,569,267 $ 7,361,615
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The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
<PAGE>
FIRSTQUOTE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months ended For the Nine Months
September 30, ended September 30
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2000 1999 2000 1999
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
REVENUE $ 1,567,374 $ 565,703 $ 4,262,503 $ 1,210,065
OPERATING EXPENSES
Cost of Revenue 1,354,771 759,884 3,381,548 1,599,416
Selling & Market Development Expenses 175,845 171,110 597,122 308,501
General & Administrative Expenses 2,582,175 1,231,721 7,091,165 3,356,281
----------- ------------ ----------- -----------
4,112,791 2,162,715 11,069,835 5,264,198
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OPERATING LOSS (2,545,417) (1,597,012) (6,807,332) (4,054,133)
OTHER INCOME AND EXPENSES
Interest Income 17,100 28,313 94,534 86,222
Foreign Exchange (Loss)/gain, net (816,902) 292,540 (1,081,179) (674,904)
----------- ------------ ----------- -----------
(799,802) 320,853 (986,645) (588,682)
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NET LOSS APPLICABLE TO COMMON SHAREHOLDERS (3,345,219) (1,276,159) (7,793,977) (4,642,815)
=========== ============ =========== ===========
Basic and diluted net loss per common share $ (0.25) $ (0.21) $ (0.72) $ (0.77)
=========== ============ =========== ===========
Basic and diluted weighted average number of
common shares 13,414,133 6,202,459 10,828,875 6,004,634
=========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
<PAGE>
FIRSTQUOTE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
ended September 30, ended September 30,
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2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(3,345,219) $(1,276,159) $(7,793,977) $(4,642,815)
Adjustments to reconcile net loss to net
cash used in operating activities:
Exchange loss/(gain) 816,902 (292,540) 1,081,179 674,904
Depreciation of property and equipment 257,983 155,114 715,703 444,425
Amortization of goodwill 277,370 -- 832,111 --
Provision for doubtful debtors 151,305 14,975 233,704 55,779
Stock issued for license costs 31,250 31,250 93,750 93,750
Change in operating assets and liabilities
Trade accounts receivable (222,983) (39,033) (766,365) (315,452)
Prepaid expenses and other receivables 135,400 (194,477) (95,825) (398,045)
Trade accounts payable 399,376 124,106 766,515 323,986
Accrued expenses 199,224 223,099 737,295 336,558
Deferred income (110,191) 26,751 244,663 129,130
----------- ----------- ----------- -----------
Net cash used-in operating activities (1,409,583) (1,226,914) (3,951,247) (3,297,780)
CASH FROM INVESTING ACTIVITIES:
Purchase of equipment (391,219) (250,078) (1,370,057) (415,350)
Other non-current asset movements (2,962) 25,777 -- (153,527)
----------- ----------- ----------- -----------
Net cash used in investing activities (394,181) (224,301) (1,370,057) (568,877)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common and Preferred Stock -- -- 7,155,180 7,000,000
Commission on issuance of Common and
Preferred Stock -- -- (245,259) (70,000)
Issuance of stock upon exercise of
warrants 10,500 178,500 488,250 656,775
Issuance of stock upon exercise of options -- -- 155,000 --
Reimbursement of advances from
stockholders and related parties -- -- -- (1,000,000)
Payment of capital lease obligations (7,031) (27,590) (90,358) (106,471)
----------- ----------- ----------- -----------
Net cash provided by financing
activities 3,469 150,910 7,462,813 6,480,304
Effect of exchange rate changes on cash and
cash equivalents (238,511) 25,495 (290,836) (166,158)
NET INCREASE IN CASH AND CASH EQUIVALENTS (2,038,806) (1,274,810) 1,850,673 2,447,489
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR 4,983,109 3,951,749 1,093,630 229,450
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 2,944,303 $ 2,676,939 $ 2,944,303 $ 2,676,939
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are in integral part of these unaudited condensed
consolidated financial statements
<PAGE>
FIRSTQUOTE INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows at September 30, 2000, and for all periods
presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these unaudited condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December 31, 1999 audited
financial statements. The results of operations for the three months ended
September 30, 2000 are not necessarily indicative of the operating results for
the full year.
NOTE 2 - ISSUANCE OF COMMON STOCK
In March 2000, the Company issued 1,061,057 shares of its Common Stock to a
number of existing and additional venture capital and private investors for a
total consideration of $7,155,180.
In April 2000, the holders of 1,923,716 shares of Series B Preferred Stock and
3,783,785 shares of Series C Preferred Stock converted those shares into
5,707,501 shares of Common Stock.
During the nine months ended September 30, 2000, the holders of 6,500 shares of
Series A Preferred stock converted those shares to into 13,000 shares of Common
Stock.
During the nine months ended September 30, 2000, the Company issued 139,500
shares of its Common Stock upon the exercise of 139,500 warrants previously
issued with the Series A Preferred stock and certain stock units. The warrants
were exercisable at $3.50.
During the nine months ended September 30, 2000, the Company issued 70,000
shares of its Common Stock upon the exercise of 70,000 options by employees of
the Company. The options carried strike prices ranging from $2.00 to $3.50.
<PAGE>
Item 2. Management's Discussion And Analysis Or Plan Of Operation
Background
FirstQuote is a European technology provider of financial information and
electronic brokerage solutions. The Company offers a comprehensive range of
real-time market data and electronic brokerage systems for both the
institutional and individual investor. The financial information systems are
offered via the Internet or through virtual private networks using Internet
technology. The Company also provides related network services to users of its
financial information and electronic brokerage products. Further description of
the Company's activities and products can be found at www.firstquote.com or at
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www.firstquote.net.
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Effective May 7, 1999, the Company amended its Certificate of Incorporation to
change its corporate name to FirstQuote Inc.
Effective December 24,1999, the Company acquired 100% of Stockdata Amsterdam BV,
a company located in Amsterdam, for a consideration of up to $3,750,000.
Stockdata is engaged in the distribution of real-time market data products to
the Benelux region, primarily through the use of datacast technologies via cable
networks. The company's name was changed to FirstQuote Stockdata BV upon
acquisition.
Regarding the Company's plan of operations for the 2000 fiscal year, it will
continue target strategic alliances in key European financial centers from which
to leverage its growth. It plans to market its financial market information,
analytical tools and electronic brokerage systems both under its own product
names and as co-branded implementations with institutional clients.
Currency Exchange Rates: Although the Company reports its results in US dollars,
virtually all of its revenues and expenses are denominated in other currencies,
primarily Swiss francs, Euros and Pounds sterling. Consequently, the Company's
net results are directly affected by changes in the exchange rate between the US
dollar on the one hand, and the Swiss franc, Euros or Pounds sterling on the
other. Transactions of the Company and its subsidiaries are recorded based on
the functional currency of each particular company. The Company's main operating
subsidiary maintains a Swiss franc functional currency and has a US dollar
denominated current account with its parent company. This results in foreign
exchange differences being recorded based on variations in the USD/CHF rate of
exchange, which are carried forward on consolidation.
Assets and liabilities of the Company and its subsidiaries are translated at the
exchange rate in effect at each year-end. Income statement accounts are
translated at the average rate of exchange prevailing during the year.
Translation adjustments arising from differences in exchange rates from period
to period are included in the cumulative translation adjustment account in
stockholders' equity.
Results of Operations
The Company acquired FirstQuote Stockdata on December 24,1999. FirstQuote
Stockdata has been included in the consolidated operating results for all
periods subsequent to December 24,1999.
Revenue for the nine months ended September 30, 2000 was $4,262,503, an increase
of 252% over that of $1,210,065 for the corresponding prior year period. Revenue
is comprised primarily of the provision of financial market data services and
related network services, the development and operation of market data enabled
web-sites, as well as transaction related revenue linked to the provision of
outsourced electronic brokerage services. Without giving effect to the
consolidation of FirstQuote Stockdata, the Company had a 135% increase in
revenue during the nine months ended September 30, 2000 over the prior year
period.
Revenue for the third quarter of 2000 increased 11% above that of the second
quarter of 2000 and 177% over that for the three months ended September 30,
1999. Without giving effect to the consolidation of FirstQuote Stockdata, the
Company had a 69% increase in revenue during the three month period ended
September 30, 2000 over the prior year period.
<PAGE>
Cost of revenue for the nine months ended September 30, 2000 was $3,381,548, an
increase of 111% above the amount of $1,599,416 for the corresponding prior year
period. Cost of revenue as a percentage of revenue has decreased from 132% in
the prior year to 79%, reflecting the economies of operation at a larger scale.
Cost of revenue includes content acquisition costs, network expenses, and
commissions.
Cost of revenue for the three months ended September 30, 2000 has increased by
35% over that of the preceding calendar quarter, essentially as a result of a
step expansion in the Company's network infrastructure (including related set up
costs), and ability to source market data content directly from source. These
items have increased the percentage that cost of revenue is to sales to 86% from
71% in the preceding calendar quarter, and are aimed at improving the
reliability of market data and being able to support increased levels of
operations.
Selling & Market Development expenses for the nine months ended September 30,
2000 were $597,122, an increase of 94% above the amount of $308,501 for the
corresponding prior year period. Corporate and product marketing expenses have
increased in conjunction with the corporate name change to FirstQuote and the
continued rollout of the Company's services in Europe.
Selling and market development expenses for the three months ended September 30,
2000 have decreased by 38% from the preceding calendar quarter where specific
marketing communications projects were conducted.
General and administrative expenses for the nine months ended September 30, 2000
were $7,091,165, an increase of 111% from the amount of $3,356,281 for the
corresponding prior year period. Staff costs represent the major component of
this expense and have increased 96% from $1,691,811 to $3,321,443. Office
expenses have increased 98% from $448,336 to $885,705, and depreciation charges
(excluding amortisation of goodwill) have increased by 61% from $444,425 to
$715,703. Amortization of goodwill related to the acquisition of FirstQuote
Stockdata amounted to $832,111 for the nine months ended September 30, 2000.
General and administrative expenses for the three months ended September 30,
2000 have increased by 10% from the preceding calendar quarter due to an
increase in office accommodation expenses (partially due to the opening of an
office in Frankfurt) as well as generally increased levels of staffing.
Operating loss for the nine months ended September 30, 2000 was $6,807,332, an
increase of 68% from the amount of $4,054,133 for the prior year period.
Expressed as a percentage of revenue the operating loss has improved from 335%
to 140% of revenue.
Operating loss for the three months ended September 30, 2000 was $2,545,417,
representing a 15% increase over that of the preceding calendar quarter.
Foreign exchange gains and losses arise essentially from the revaluation of
amounts due by FirstQuote SA to FirstQuote Inc., which are denominated in US
dollars. The functional currency of FirstQuote SA is the Swiss Franc, and the
resultant loss on revaluation in Swiss Francs is carried forward in
consolidation. The USD/CHF rate of exchange was 1.3760 at December 31, 1998,
1.5915 at December 31, 1999 and 1.7241 at September 30, 2000.
The continued increase in the value of the US Dollar against most European
currencies has resulted in revenues and costs reported in US Dollars being lower
than had the value of the USD remained more constant.
Net loss for the nine months ended September 30, 2000 was $7,793,977, compared
with $4,642,815 for the corresponding prior year period.
Liquidity and Financial Condition
As of September 30, 2000, the Company had negative working capital of $173,030
and stockholders' equity of $4,480,211.
<PAGE>
In January 2000 the Company obtained bridge financing of $510,000 from three of
its existing financial investors, essentially to finance the acquisition of
Stockdata, and pending the closing of a private placement of 1,061,057 of its
common shares for a total amount of $7,155,180, which was concluded during March
2000. Two thirds of the bridge financing was converted to common shares as part
of the private placement and the remaining $170,000 was repaid during April 2000
at the option of the Company.
During the nine months ended September 30, 2000, the Company also received
$488,250 following the exercise of 139,500 warrants at $3.50. As at August 7,
2000, a further 150,631 such warrants are in existence, all exercisable at
$3.50.
During the nine months ended September 30, 2000, the Company also received
$155,000 following the exercise of 70,000 employee stock options at strike
prices varying between $2.00 and $3.50.
The Company continues to generate negative cashflows from operations since its
cost base exceeds its revenues from operating activities. The negative cash flow
from operations was approximately $613,000 per month during the third quarter of
2000, compared with $519,000 per month during the second quarter of 2000 and
$490,000 per month during the first quarter of 2000.
The Company will require, at least, $8,000,000 of capital over the next 12
months in order to fund the planned operating and capital expenditure. The
Company intends to pursue the required capital through the sale of additional
securities. However, there are no commitments or understandings on the part of
any party to provide any additional debt or equity capital to the Company and
there can be no assurance that the Company will be able to obtain additional
capital. The Company's inability to increase revenue or obtain additional debt
or equity capital on a timely basis will, in all likelihood, materially
adversely affect its future planned growth of operations and revenues.
Safe Harbor
This report contains various forward-looking statements that are based on the
Company's beliefs as well as assumptions made by and information currently
available to the Company. When used in this report, the words "believe,"
"expect," "anticipate," "estimate" and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks, uncertainties and assumptions referred to herein, including, without
limitation, the early stage nature of the Company's operations and the risks and
uncertainties concerning the market acceptance of its services and products;
technological changes; increased competition; and general economic conditions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, estimated, or projected. The Company cautions potential
investors not to place undue reliance on any such forward-looking statements,
all of which speak only as of the date made.
<PAGE>
PART II - Other Information
Item 1. Legal Proceedings.
Inapplicable.
Item 2. Changes in Securities and Use of Proceeds
During the three months ended September 30, 2000, 1,500 shares of
Series A Preferred stock were converted into 3,000 shares of Common
Stock. The shares were issued pursuant to Rule 506 under the
Securities Act of 1933, as amended. There was no underwriter involved
in this issuance.
During the three months ended September 30, 2000, the Company issued
3,000 shares of its Common Stock upon the exercise of 3,000 warrants
previously issued with the Series A Preferred Stock. The warrants were
exercisable at $3.50. The shares were issued pursuant to Rule 506
under the Securities Act of 1933, as amended. There was no underwriter
involved in this issuance.
Item 3. Defaults Upon Senior Securities
Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
Item 5. Other Information
Inapplicable.
Item 6. Exhibits and Reports on From 8-K.
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports of Form 8-K
Inapplicable.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FIRSTQUOTE INC.
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(Registrant)
Dated: November 13, 2000 By /s/ Neil Gibbons
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Neil Gibbons
Chief Executive Officer
/s/ Mark Benn
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Mark Benn
Chief Financial Officer
