SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(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, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-24205
FACTUAL DATA CORP.
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(Exact name of small business issuer as specified in its charter)
Colorado 84-1449911
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5200 Hahns Peak Drive, Loveland Colorado 80538
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(Address of principal executive offices) (Zip Code)
(970) 663-5700
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(Issuer's telephone number, including area code)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [ X ] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of August 11, 2000.
Class Number of Shares
---------------------------------------------------
Common Stock 5,381,501
Transitional Small Business Disclosure Format: [ ] Yes [X] No
1
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FACTUAL DATA CORP.
Factual Data Corp. (the "Company") is filing this Amendment No. 1 on Form
10-QSB/A (this "Amendment") to its Quarterly Report on Form 10-QSB for the
quarter ended March 31, 2000 filed with the SEC on May 12, 2000 (the "Form
10-QSB").
Accordingly, by means of this Amendment, the Company hereby amends the Form
10-QSB to include the information required by Part I thereof.
In order to facilitate understanding of the Form 10-QSB, in addition to
providing information required by Part I of Form 10-QSB, this Amendment restates
in its entirety all information contained in initial Form 10-QSB.
All subsequent references to "Form 10-QSB" shall refer to the initial Form
10-QSB, as amended and restated in this Amendment.
INDEX
PART I. Financial Information Page No.
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Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 2000
(Unaudited) and December 31, 1999 3
Unaudited Consolidated Statements of Income
-- For the Three Months Ended March 31, 2000
and March 31, 1999 4
Unaudited Consolidated Statements of Cash Flows
-- For the Three Months Ended March 31, 2000
and March 31, 1999 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-10
PART II. Other Information
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
Index to Exhibits 13
2
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FACTUAL DATA CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2000 December 31,
(Unaudited) 1999
-------------- --------------
Current assets
Cash and cash equivalents $ 419,124 $ 1,023,945
Prepaid expenses and other 1,021,882 949,542
Accounts receivable, net 5,075,373 3,663,094
-------------- --------------
Total current assets 6,516,379 5,636,581
Property and equipment, net 6,336,749 5,998,532
Intangibles 27,378,453 27,756,373
Other assets 160,865 300,989
-------------- --------------
$ 40,392,446 $ 39,692,475
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Line-of-credit $ 1,400,000 $ 500,000
Current portion of long-term debt 3,266,439 3,432,526
Accounts payable 3,818,670 3,099,678
Accrued payroll and expenses 855,389 968,691
Deferred income taxes 13,386 13,386
-------------- --------------
Total current liabilities 9,353,884 8,014,281
Long-term debt 5,058,994 5,908,584
Deferred income taxes 438,728 410,645
Shareholders' equity
Preferred stock, 1,000,000 shares
authorized; none issued and
outstanding - -
Common stock, 10,000,000 shares
authorized; 5,381,501 at
March 31, 2000; 5,380,103 at
December 31, 1999 issued and
outstanding 22,490,214 22,478,244
Retained earnings 3,050,626 2,880,721
-------------- --------------
Total shareholders' equity 25,540,840 25,358,965
-------------- --------------
$ 40,392,446 $ 39,692,475
============== ==============
The accompanying notes to unaudited consolidated financial statements are an
integral part of these consolidated statements.
3
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FACTUAL DATA CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended
March 31
---------------------------------
2000 1999
-------------- --------------
Revenue
Information services $ 6,979,067 $ 4,391,299
Ancillary income 496,453 477,714
System affiliates 313,310 483,869
Training, license and other 500 -
-------------- --------------
Total revenue 7,789,330 5,352,882
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Operating Expenses
Costs of services provided 4,367,766 2,976,054
Consolidation costs 289,500 267,611
Selling, general and administrative 1,793,080 815,171
Depreciation and amortization 911,306 434,233
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Total operating expenses 7,361,652 4,493,069
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Income from operations 427,678 859,813
Other income (expense)
Other income 71,531 59,797
Interest expense (211,922) (85,854)
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Total other expense (140,391) (26,057)
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Income before income taxes 287,287 833,756
Income tax expense 117,382 325,223
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Net income and comprehensive income $ 169,905 $ 508,533
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Basic earnings per share $ .03 $ 0.14
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Weighted average shares outstanding 5,380,103 3,596,663
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Diluted earnings per share $ .03 $ 0.13
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Weighted average shares outstanding 5,480,585 3,790,037
============== ==============
Supplemental Information
EBITDA (a) $ 1,410,515 $ 1,353,843
(a) EBITDA is defined as earnings before interest, income taxes,
depreciation and amortization. EBITDA should not be considered as an
alternative to net income (as an indicator of operating performance) or
as an alternative to cash flow (as a measure of liquidity or ability to
service debt obligations) and is not in accordance with, nor superior
to, generally accepted accounting principles, but provides additional
information for evaluating Factual Data Corp.
The accompanying notes to unaudited consolidated financial statements are an
integral part of these consolidated statements.
5
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FACTUAL DATA CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months Ended
March 31
--------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 169,905 $ 508,533
-------------- --------------
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation and amortization 911,306 434,233
Deferred income taxes 28,083 8,988
Changes in operating assets and liabilities
Accounts receivable (1,412,279) (683,943)
Prepaid expenses (72,340) (186,857)
Other assets 140,124 (78,399)
Accounts payable 718,992 434,353
Accrued payroll, payroll taxes and expenses (113,302) 15,761
Accrued taxes and other - (344,965)
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200,584 (400,829)
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Net cash provided by operating activities 370,489 107,704
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Cash flow from investing activities
Purchase of property and equipment (423,639) (681,083)
Net cash used in the acquistion of businesses (215,738) (1,693,820)
Capitalized software costs (206,028) -
Sales of short-term investments - 2,212,386
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Net cash used in investing activities (845,405) (162,517)
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Cash flows from financing activities
Principal payments on long-term debt (1,041,875) (480,981)
Net activity on line of credit 900,000 -
Net proceeds from employee stock option plan 11,970 -
Net proceeds in private placement offering
(net of offereing expenses paid of $450,287) - 10,049,713
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Net cash (used) provided in financing activities (129,905) 9,568,732
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Net (decrease) increase in cash and cash equivalents (604,821) 9,513,919
Cash and cash equivalents, at beginning of period 1,023,945 1,093,295
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Cash and cash equivalents, at end of period $ 419,124 $ 10,607,214
============== ==============
</TABLE>
Supplemental disclosure of cash flow information:
Interest paid on borrowings for the three months ended March 31, 2000 and
1999 was $211,922 and, $85,854 respectively.
Supplemental disclosure of non-cash investing and financing activities:
During the three months ended March 31, 2000 and 1999, the Company
financed fixed assets purchases totaling $37,939 and $60,870,
respectively, with notes payable and capital leases.
During the three months ended March 31, 2000 and 1999, the Company
incurred $ -0- and $1,018,685, respectively, in offering costs that
were included in accounts payable.
During the three months ended March 31, 1999, the Company acquired five
companies for $1,693,820 cash and notes payable and other liabilities
of $1,470,811.
During the three months ended March 31, 1999, the Company assumed other
liabilities with prior acquisitions totaling $210,714.
The accompanying notes to unaudited consolidated financial statements are
an integral part of these consolidated statements.
6
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Summary of Significant Accounting Policies
The consolidated financial statements are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The consolidated
financial statements should be read in conjunction with the financial statements
and notes thereto contained in the Company's Annual Report on Form 10-KSB filed
with the Securities and Exchange Commission March 31, 2000, which includes
audited financial statements for the years ended December 31, 1999 and 1998. The
results of operations for the three months ended March 31, 2000, may not be
indicative of the results of operations for the year ended December 31, 2000.
The Company's diluted earnings per share takes into account warrants
issued in the Company's IPO, the private equity offering and other outstanding
stock options.
Note 2: Line-of-Credit
The Company refinanced its line-of-credit during the first quarter of 2000.
The line-of-credit at March 31, 2000 consists of:
$3,000,000 line-of-credit, interest payable at 8.75% principal and
unpaid interest due April 2001. The line-of-credit requires the
Company to meet certain financial restrictive covenants. The line is
collateralized by substantially all the assets of the Company.
$ 1,400,000
===========
Note 3: Stockholder's Equity
On March 1, 2000, in connection with a consulting agreement to
provide investor relations services, the Company granted an investor relations
firm three stock purchase warrants with the following terms:
<TABLE>
<CAPTION>
Description Number of Warrants Exercise Price Term
----------- ------------------ -------------- ----
<S> <C> <C> <C>
Series A Warrants 30,000 9.00 March 1, 2000 - March 1, 2003
Series B Warrants 30,000 11.00 March 1, 2000 - March 1, 2003
Series C Warrants 40,000 13.00 March 1, 2000 - March 1, 2003
-------------- ------------------ -----------------------------
100,000 $9.00 - 13.00 March 1, 2000 - March 1, 2003
============== ================== =============================
</TABLE>
The warrants become exercisable by the holder only once the Company's
stock trades at the specified exercise price for 20 consecutive days.
Additionally, the Series B and C warrants provide for certain performance
criteria to be met prior to being exercisable. The Company will record
consulting expense in connection with the warrants in future periods once they
are vested and become exercisable.
The Company also issued 1,398 shares of stock to employees valued at
$11,970 in connection with the Company's Employee Stock Purchase Plan during the
first quarter of 2000.
7
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
This filing contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby. These
forward-looking statements include the plans and objectives of management for
future operations, including plans and objectives relating to services offered
by and future economic performance of the Company.
The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties that might
adversely affect the Company's operating results in the future in a material
way. Such risks and uncertainties include, but are not limited to; changes in
interest rates, the effectiveness of the Company's marketing campaign, the
response of the mortgage industry, continued market demand for the Company's
services, the effects of seasonality in the housing market, competition, the
success of the Company's consolidation plan, its ability to manage growth, and
the Company's ability to successfully develop and market new report services.
Overview
Factual Data Corp. is a Loveland, Colorado-based information service
provider to the mortgage and consumer lending industries, employers, landlords
and other business customers located throughout the United States. The Company
markets its services through its website www.factualdata.com, and nationally
through 44 combined locations, including Company operated offices, franchisees
and licensees.
Factual Data Corp. was formed in 1985 to provide customized credit reports
to mortgage lenders. In the past fifteen years, we have greatly expanded our
business by developing a wide range of information services and sophisticated
technology to deliver those services. We were among the pioneers in delivering
business-to-business information services via electronic commerce. For over
seven years, our customers have been able to reap the benefits of our
information services by way of electronic order and delivery with the touch of a
few buttons from their PC. Today, nearly all of our customers receive our
customized reports by modem or network delivery directly to their computers.
Factual Data became a publicly traded company in 1998 and its common stock and
warrants trade on the NASDAQ National Market under the symbols FDCC and FDCCW.
In the first quarter 2000, Factual Data's portfolio of services included
fully automated consumer credit reports, employee screening, resident screening,
and similar information services for businesses and government-sponsored
enterprises. Items of note in the first quarter included the introduction of our
CorpData commercial credit reporting service, the release of our technological
interface with Trakker Corporation's automated underwriting system, our
agreement with Cavion.com which marked our emergence as an information service
provider to the credit union market segment, and new national accounts with
First Franklin Financial, Accubank Mortgage and Loan Link Financial.
For more information about our services, or items of note to investors,
please visit our website www.factualdata.com. The website shall not be deemed to
be part of this report.
8
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Results of Operations
The following table sets forth for the periods indicated, as a
percentage of total revenue, those items included in the Company's Unaudited
Consolidated Statements of Income:
For the Three Months Ended
March 31
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2000 1999
--------- ---------
Revenue
Information services 89.6 % 82.1 %
Ancillary income 6.4 8.9
System affiliates 4.0 9.0
Training, license and other 0.0 0.0
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Total revenue 100.0 % 100.0 %
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Operating expenses
Costs of services provided 56.1 55.6
Consolidation costs 3.7 5.0
Selling, general and administrative 23.0 15.2
Depreciation and amortization 11.7 8.1
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Total operating expenses 94.5 % 83.9 %
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Income from operations 5.5 16.1
Other income (expense)
Other income 0.9 1.1
Interest expense -2.7 -1.6
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Total other expense -1.8 -0.5
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Income before income taxes 3.7 15.6
Income tax expense 1.5 6.1
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Net income and comprehensive income 2.2 % 9.5 %
========= =========
Supplemental Information
EBITDA (a) 18.1 % 25.3%
(a) EBITDA is defined as earning before interest, income
taxes, depreciation and amortization. EBITDA should not be
considered as an alternative to net income (as an indicator of
operating performance) or as an alternative to cash flow (as a
measure of liquidity or ability to service debt obligations)
and is not in accordance with, nor superior to, generally
accepted accounting principles, but provides additional
information for evaluating Factual Data Corp.
Comparison of three months ended March 31, 2000 and March 31, 1999
Information services revenue increased $2.59 million, or 59%, from
$4.39 million in the first quarter 1999 to $6.98 million in the first quarter
2000. The increase was primarily a result of our acquisitions. We completed
twenty-eight acquisitions through the first quarter 2000 compared to eleven
acquisitions through the first quarter 1999. We continued to diversify in the
business to business information services sector, with employment screening and
resident qualifier services. Diversification into non-first mortgage lending,
new clients like the Money Store, and new business partners like Fannie Mae, all
also contributed to increased revenues in the first quarter 2000.
Ancillary income represents fees paid by System Affiliates for various
additional products and services provided to them. Ancillary income increased by
$18,700, or 4%, from $478,000 in the first quarter 1999 to $496,000 in the first
quarter 2000. The increase is primarily a result of us providing additional
services to our System Affiliates.
9
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System Affiliates revenues decreased $171,000, or 35%, from $484,000 in
the first quarter 1999 to $313,000 in the first quarter 2000. The decrease is
due to the acquisition of nine System Affiliates and the reduced royalty fees.
The reduction in System Affiliates revenues is expected to continue as we
acquire additional System Affiilates and phase out our franchising and licensing
programs.
Costs of services increased $1.39 million, or 47%, from $2.98 million
in the first quarter 1999 to $4.37 million in the first quarter 2000. The
increases in direct operational costs are related to our increased revenues. The
cost of services, as a percentage of revenue, was relatively unchanged from the
first quarter of 1999 at 55.6% compared to the first quarter of 2000 at 56.1%.
Through the first quarter 2000 twenty-eight acquisitions were completed as
compared to eleven acquisitions through the first quarter 1999. As true variable
cost, these cost of services are directly related to salaries, bureau costs, and
telecommunication costs.
Selling, general and administrative expenses increased $975,000, or
120%, from $815,000 in the first quarter 1999 to $1.79 million in the first
quarter 2000. This increase is related to costs associated with building our
corporate, regional processing and technology infrastructures. Throughout 1999
and into the first quarter of 2000, we focused on the building of a new
foundation for Factual Data Corp. By successfully creating a dynamic
infrastructure, in terms of management, national account sales, and technology,
we expect continued success in attracting and retaining large national accounts
across service lines.
Consolidation costs for the first quarter 2000 were $290,000 as
compared to $268,000 for the first quarter 1999. These costs include one time
consolidation charges for items such as recruiting fees, salaries for terminated
owners and managers of acquired businesses, and travel costs for the
consolidation and relocation of our regional processing centers.
Depreciation and Amortization for the first quarter 2000 was $911,000
compared to $434,000 for the first quarter 1999. This increase of $477,000, or
110%, reflects the amortization expense for twenty-eight acquisitions through
the first quarter 2000 compared to eleven acquisitions through the first quarter
1999.
Interest expense increased $126,000, or 147%, from $86,000 in the first
quarter 1999 to $212,000 in the first quarter 2000. This increase is due to
additional notes payable issued in connection with our acquisitions.
Income taxes decreased $208,000, or 64%, from $325,000 in the first
quarter 1999 to $117,000 in the first quarter 2000. Our effective tax rate for
the first quarter 1999 was 39% and 41% for the first quarter 2000.
As a result of the foregoing factors, net income for the first quarter
2000 was $170,000, or $0.03 per diluted share, based on 5,480,585 shares
compared to $509,000, or $0.13 per diluted share, based on 3,790,037 shares for
the first quarter 1999. This earning per share calculation takes into account
consolidation costs of $290,000 or $0.05 per diluted share for the first quarter
2000.
Our first quarter 2000 EBITDA (earnings before interest, taxes,
depreciation and amortization) was $1.41 million, or $0.26 per diluted share
based on 5,480,585 shares, as compared to $1.35 million, or $0.36 per diluted
share based on 3,790,037 shares in the first quarter 1999. In the first quarter
2000, this EBITDA per share calculation takes into account consolidation costs
of $290,000, or $0.05 per diluted share, as a result of acquisitions, through
the first quarter 2000. Excluding the consolidation costs we would have reported
EBITDA for the first quarter 2000 of $1.7 million, or $0.31 per diluted share.
As previously stated, EBITDA should not be considered as an alternative
to net income (as an indicator of operating performance) or as an alternative to
cash flow (as a measure of liquidity or ability to service debt obligations) and
is not in accordance with, nor superior to, generally accepted accounting
principles, but provides additional information for evaluating Factual Data
Corp.
Liquidity and Capital Resources
We had cash and cash equivalents of $419,000 at March 31, 2000. We were
able to manage the net impact of accounts receivable, accounts payable, and
accrued expenses on cash flows from operations, which with net income of
$170,000 and depreciation and amortization of $911,000 resulted in cash flow
provided from operations of $370,000.
10
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We used cash and cash equivalents of $424,000 to purchase additional
equipment and furniture to finish building the infrastructure for our corporate
and regional centers. We also used cash to fund $1.04 million of principal
payments on long-term debt. Net cash used for the continuing acquisition costs
were $216,000, and net activity on the line of credit was $900,000.
Management believes that our anticipated cash requirements for the
immediate future will be met from internally generated funds. The Company
currently has a working capital deficit and is negotiating with a bank a working
capital, acquisition and debt restructure line for a total of a $10 million
credit facility.
Inflation
Although we cannot accurately anticipate the effect of inflation on our
operations, we do not believe that inflation has had, or is likely in the
forseeable future to have, a material effect on our results of operations or
financial condition.
11
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II - OTHER INFORMATION
Item 1. Legal Proceedings
See Item 3 of the registrant's annual report on Form 10K-SB for the
year ended December 31,1999.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - The following exhibits are filed herewith:
No. Description
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27 Financial Data Schedule
12
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SIGNATURES
In accordance with 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.
Dated: August 11, 2000
FACTUAL DATA CORP.
(Registrant)
/s/ Jerald H. Donnan
--------------------
Jerald H. Donnan
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Todd A. Neiberger
---------------------
Todd A. Neiberger
Chief Financial Officer
(Principal Financial and Accounting Officer)
