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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION l3 OR l5(d) OF
THE SECURITIES EXCHANGE ACT OF l934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-25849
OneSource Information Services, Inc.
(Exact name of registrant as specified in its charter)
Delaware 04-3204522
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
300 Baker Avenue, Concord, MA 01742
----------------------------------------
(Address of principal executive offices,
including zip code)
Registrant's telephone number, including area code: (978) 318-4300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section l2(g) of the Act:
Common Stock, par value $.01 per share
(Title of class)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section l3 or l5(d) of the Securities Exchange Act of
l934 during the preceding l2 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by nonaffiliates of the
registrant, based on the closing price of the common stock on March 1, 2000 of
$9.50, as reported on the NASDAQ National Market, was approximately $52,000,000.
Shares of common stock held by each officer and director and by each person who
owns 5% or more of the outstanding common stock have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for any other purpose.
As of March 1, 2000, the registrant had 10,959,362 shares of common stock
outstanding, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE:
OneSource Information Services, Inc. ("OneSource") intends to file its
proxy statement pursuant to Regulation 14A within 120 days of the end of the
fiscal year ended December 31, 1999. Portions of the proxy statement are
incorporated by reference into Part III of this Annual Report on Form 10-K. In
addition, OneSource has filed a Registration Statement on Form S-1, File No.
333-73263.
TABLE OF CONTENTS
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PART I Page
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Item 1. Business ........................................................................... 3
Item 2. Properties ......................................................................... 11
Item 3. Legal Proceedings .................................................................. 11
Item 4. Submission of Matters to a Vote of Security Holders................................. 11
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters .............. 12
Item 6. Selected Consolidated Financial and Operating Data ................................. 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations ..................................................... 15
</TABLE>
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<TABLE>
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Item 7A. Quantitative and Qualitative Disclosure About Market Risk........................... 30
Item 8. Financial Statements and Supplementary Data......................................... 31
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................................................ 31
PART III
Item 10. Directors and Executive Officers of the Registrant ................................. 31
Item 11. Executive Compensation ............................................................. 31
Item 12. Security Ownership of Certain Beneficial Owners and Management ..................... 31
Item 13. Certain Relationships and Related Transactions ..................................... 31
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ................... 31
SIGNATURE PAGE .................................................................................. 36
</TABLE>
PART I
ITEM 1. Business
Except for historical information contained herein, the matters discussed
in this Annual Report on Form 10-K are forward-looking statements that involve
risks and uncertainties. OneSource makes such forward-looking statements under
the provision of the "Safe Harbor" section of the Private Securities Litigation
Reform Act of 1995. Any forward-looking statements should be considered in light
of the factors described below in Item 7 under "Factors that May Affect Future
Results." Actual results may vary materially from those projected, anticipated
or indicated in any forward-looking statements. In this Annual Report on Form
10-K, the words "anticipates," "believes," "expects," "intends," "future,"
"could," and similar words or expressions (as well as other words or expressions
referencing future events, conditions or circumstances) identify forward-looking
statements.
GENERAL
OneSource provides Web-based business and financial information to
professionals who need quick access to reliable corporate, industry and market
intelligence. Our Business Browser product line integrates comprehensive and
up-to-date business and financial information on over one million public and
private companies from more than 25 information providers drawing upon over
2,500 sources of content. These sources include both textual information, such
as news, trade press, SEC filings, executive biographies and analyst reports,
and numeric information, such as company financial results, stock quotes and
industry statistics. Our customers access this information over the Internet
using standard Web browsers at a fixed annual subscription price.
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Our products are designed to address information needs of leading
professional and financial services firms, technology companies and other large
organizations. Representative customers include American Express, Bain &
Company, Boeing, British Telecom, Deloitte & Touche, Harvard Business School,
KPMG Peat Marwick, MCI/Worldcom, Merrill Lynch, Oracle and SAP.
On October 1, 1999, OneSource acquired Corporate Technology Information
Services, Inc. ("Corporate Technology"), a Delaware corporation located in
Woburn, Massachusetts. Corporate Technology is a provider of high technology
company profiles with a focus on emerging private companies.
At December 31, 1999, 583 organizations subscribed to our Web-based
Business Browser product line, up from 445 at December 31, 1998. On average, our
customers for Web-based products at December 31, 1999 had an annualized contract
value of $66,500 per customer, compared to $58,200 per customer at December 31,
1998. The annualized value of Business Browser customer contracts was $38.7
million at December 31, 1999, having grown from $25.9 million at December 31,
1998. Of this $38.7 million, $29.5 million was attributable to those customers
that were under contract at both December 31, 1998 and 1999. The renewal rate of
the Business Browser product line for 1999 was 86% calculated on a dollar basis.
For more information regarding annualized contract value, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Annualized Contract Value."
OneSource was incorporated in Delaware in July 1993 under the name Datext
Holding Corporation. Our principal executive offices are located at 300 Baker
Avenue, Concord, Massachusetts, 01742 and our telephone number is (978)
318-4300. OneSource's common stock is traded on the NASDAQ National Market
System under the symbol "ONES" and our web address is www.onesource.com.
PRODUCTS
OneSource's Business Browser product line is designed to be a comprehensive
and easy to use business and financial information resource for professionals
who need quick access to reliable corporate, industry and market intelligence.
Business Browser products integrate over 2,500 sources of business
information from more than 25 category-leading business and financial
information providers. These sources include both textual information, such as
news, trade press, SEC filings, executive biographies and analyst reports, and
numeric information, such as company financial results, stock quotes and
industry statistics. OneSource uses its proprietary KeyID technology to sort,
prioritize, integrate and link information on over one million public and
private companies worldwide.
Our Business Browser product line is accessed through a standard Web
browser that is already available and familiar to end-users. Because our
products are based on standard
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Web technology, our customers require minimal installation and systems support
and users have full access to the products at any time from anywhere via the
Internet.
OneSource focuses on the functional uses of the business and financial
information it delivers. The Business Browser product line has been designed for
use not only by traditional users of business information, but also throughout
an organization, including sales, marketing, finance and management
professionals. We apply our knowledge of how business professionals use
information to transform raw, disparate data into meaningful, actionable
information. We focus on integrating and presenting information so that
interpretation, manipulation and analysis can be performed more easily by the
end user. Because the interface is built around the inquiries of professionals,
users require minimal training to become productive quickly.
OneSource's pricing strategy is designed to be particularly attractive to
large organizations. The Business Browser product line is available at a fixed
annual subscription price which declines on a per-user basis as the total number
of users increases for that customer. The fixed-price model encourages
professionals to use the products as needed without concern for additional
charges, and a declining marginal price per user encourages customers to
distribute our products widely throughout their organizations.
The Business Browser product line includes:
US BUSINESS BROWSER. Released in December 1996, US Business Browser is
focused specifically on the US and Canada. It contains a subset of business and
financial information from the Global Business Browser product. It covers over
250,000 public and private companies in the US and Canada.
UK BUSINESS BROWSER. Released in September 1997, UK Business Browser is a
comprehensive source of information on over 350,000 public and private companies
in the UK.
GLOBAL BUSINESS BROWSER. Because business professionals need a global
perspective to complement deep coverage of local markets, Global Business
Browser is available in two editions. Released in December 1997, Global Business
Browser, US Edition is a single, integrated resource that delivers comprehensive
information on over 350,000 North American and global companies. Global Business
Browser, European Edition, launched in December 1999, is an integrated resource
including both European and global content with over 350,000 companies profiled.
EUROPEAN BUSINESS BROWSER. Released in January 1999, European Business
Browser provides users with a comprehensive database on 300,000 public and
private companies across Europe, including 50,000 UK companies. An important
source of data for the European Business Browser is Dun & Bradstreet, a leading
business information source.
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Business Browser delivers information in an integrated format. This allows
customers to obtain different types of information from multiple sources in a
single report. Business Browser products organize data around business
applications and transform raw, disparate data into meaningful, actionable
information, delivered according to the characteristics users have defined and
in the custom formats, tables and reports that users require. Users who need to
perform detailed analysis can also easily transfer quantitative data into
spreadsheets or other desktop tools, such as contact management software.
Specific applications available through the Business Browser product line
include:
- "Company Profiler" delivers integrated reports on a company's
history, products, competition, industry, executives, current
news articles and financials. Both summary and detailed company
reports are available, depending on the user's need. In addition,
"Corporate Family Reports" allow users to quickly map
relationships among subsidiaries and divisions of corporations.
- "WatchList Update" automatically keeps track of news articles,
news stories, financial filings and research reports on specified
companies the user monitors.
- "Industry Profiler" delivers reports on market size,
segmentation, financial norms, ratios and forecasts for a
specified industry, as well as participants, industry news and
analysis, and creates research reports with graphs and statistics
that help track industry trends.
- "Company Finder" screens companies by defining key search
characteristics to deliver a targeted list by industry,
geography, size, revenues, employment or other key
characteristics.
- "Topic Search" screens news stories, research reports, business
descriptions and trade articles for information by topic.
- "Executive Search" provides users with reports on business
leaders by name, company, location, schools and affiliated
organizations.
- "Custom Alerts" sends daily e-mail links to current news on
user-specified companies and topics.
ADDITIONAL SOFTWARE APPLICATIONS
Two additional software applications are available with Business Browser
products:
BUSINESS BROWSER AP. Business Browser AP, which became commercially
available in August 1997, is an advanced Web-based quantitative analysis tool
available as an option with all of the Business Browser products other than
European Business Browser. Business Browser AP lets users screen across a wide
range of public company financial
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statement items, ratios, growth rates and other criteria. It also allows users
to produce detailed quantitative reports of their own design. Business Browser
AP also makes EDGAR documents more user friendly by removing confusing computer
codes, formatting tables for easy viewing and printing, and allowing users to
export tables to a spreadsheet.
BUSINESS BROWSER APPLINK. Business Browser AppLink, which became
commercially available in December 1998, is a software toolkit that allows
customers to easily incorporate Business Browser content, like company profiles,
news, business and trade articles, analyst reports, executive biographies,
industry intelligence and financial data, directly into corporate intranet
applications. Users have the ability to integrate in-depth, objective external
business information into their existing internal applications such as prospect
and customer databases, sales force automation tools, enterprise reporting
software and corporate Web applications. No special client software or dedicated
servers are necessary. AppLink-enabled applications are currently under
development at a number of client sites.
LEGACY PRODUCTS
Prior to our introduction of Business Browser in 1996, OneSource
distributed business information on CD Rom. At the end of 1999, all but one CD
Rom product had been phased out. We plan to eliminate this last CD Rom product
in 2000.
OTHER PRODUCTS
With the acquisition of Corporate Technology in October 1999, OneSource
acquired several product lines that include CD Rom and printed directories.
These products will be continued in the near term with phase out programs
beginning in 2000.
PLATFORM AND PRODUCT DEVELOPMENT
The product development function is currently carried out by 66 employees
in our Global Strategic Web Applications Team. This team includes product
managers who define functional software components, end user interfaces, report
formats and content requirements; product development engineers who take content
feeds from information partners and write database loader code; and the KeyID
team whose role, through both programming and editorial expertise, is to ensure
consistent integration and presentation of information from multiple underlying
sources of content.
The product development team uses our proprietary KeyID technology to
integrate and link public and private companies worldwide from multiple
databases, each with its own set of incompatible identifiers. Through a
combination of proprietary programmatic and editorial means, this technology
enables us to provide a single and unified presentation from multiple underlying
company databases. It also manages multiple SIC codes and industry mappings
assigned to companies by disparate databases and
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reclassifies the companies to comparable categories. The system also keeps track
of company name synonyms to allow searching by commonly used alternative company
names. The synonyms feature allows the user to input one company name or term
and to access all information for that company although it may be categorized
under different names or terms depending on the database. In total, the KeyID
database contains 1.1 million companies, 1.7 million synonyms and 40,000 URLS.
INFORMATION PROVIDERS
Each Business Browser product combines an array of carefully chosen
financial, company, industry, executive and news-related content obtained from
leading business and financial information providers identified by our Global
Strategic Web Applications Team.
We enter into contracts with our information providers which are generally
for a term of at least one year, and which renew for the same period if not
canceled with advance notice. These contracts may be terminated under certain
circumstances. Under these arrangements, royalties are generally paid on a
quarterly basis to information providers. Royalties are typically calculated
either as a flat percentage of our revenues or as a per-user fee that declines
as the number of authorized users of the product increases. In limited cases, we
pay a fixed fee per period for unlimited use of the information.
eRM PROGRAM
In October 1999, OneSource initiated its eRM Program to integrate Business
Browser with leading customer relationship management solutions. This program is
part of OneSource's strategy to expand its distribution channels through
alliances. We entered into our initial two partnerships with Pivotal
Corporation and Onyx Software Corporation to strengthen our leadership position
in this growing sector.
CUSTOMERS
At December 31, 1999, 583 organizations had subscribed to our Web-based
Business Browser product line, up from 445 at December 31, 1998. On average, our
customers at December 31, 1999 had an annualized contract value of $66,500 per
customer, compared to $58,200 per customer at December 31, 1998. The annualized
contract value of customer contracts for Business Browser products was $38.7
million at December 31, 1999, having grown from $25.9 million at December 31,
1998. For more information regarding annualized contract value, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Annualized Contract Value."
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The following is a representative list of significant customers in each of
our primary industry sectors as of December 31, 1999:
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PROFESSIONAL SERVICES FINANCIAL SERVICES TECHNOLOGY
- --------------------- ------------------ ----------
Arthur Andersen American Express Compaq
Arthur D. Little BankBoston Data General
Bain & Company Bank of Scotland JD Edwards
Cambridge Technology Partners Bank of Tokyo Lockheed Martin
Deloitte & Touche Bear Stearns MCI/Worldcom
KPMG Credit Lyonnais Nortel
Watson Wyatt First Union Bank Oracle
Merrill Lynch PeopleSoft
OTHER CORPORATIONS Oppenheimer Platinum Technology
- ------------------ Royal Bank of Canada SAP
Avery Dennison Sun Microsystems
Bayer
Boeing BUSINESS SCHOOLS
British Telecommunications ----------------
Cargill Dartmouth
General Electric Duke
Pitney Bowes Harvard
Sears Stanford
Staples University of Florida
University of Southern California
University of Texas
Yale
</TABLE>
At December 31, 1999, approximately 60% of our annualized contract value
for Web-based products came from customers in the professional services and
financial services sectors, which have been the traditional customers for
business information products. The remaining 40% of our annualized contract
value at December 31, 1999 for Web-based products represented customers in
sectors that have not historically been heavy consumers of business information
products. At these customers, Business Browser products are used by
professionals throughout the organization, including sales, marketing, finance
and management personnel, as a result of the products' ease of use and
availability over the Web.
SALES AND MARKETING
We market our products through a direct and telephonic sales force and
marketing staff, which as of December 31, 1999 consisted of 96 full-time
employees based at ten locations throughout the US and two locations in the UK.
The sales function breaks down into two major parts:
- the initial sale, which is conducted by account executives
- customer retention and growth through the sale of additional seats and
upgrades, which are primarily handled by account managers
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As of December 31, 1999, we had 18 account executives and 17 account
managers. Compensation for account executives and account managers is comprised
of base salary plus commission. The commission component typically constitutes
50% and 40% of the compensation of account executives and account managers,
respectively. We also employ a telemarketing group that assists in generating
leads for the account executives. As of December 31, 1999, there were 25 members
of the telemarketing group.
Business Browser products are sold on a subscription basis, generally for a
one-year period. Customers typically prepay for annual subscriptions. Typically,
contracts automatically renew for the same period prior to expiration unless
canceled by the client. The Business Browser product line is available at a
fixed annual subscription price which declines on a per-user basis as the total
number of users increases. List prices as of January 1, 2000 ranged from $21,000
per year for a single user seat to $298,000 per year for 1,000 user seats.
CUSTOMER SUPPORT
We provide both on-site and telephone support for clients. As of December
31, 1999, we had nine field support consultants who provide assistance before
and after sales are completed. For example, they assist in managing free product
trials for prospective customers and expanding the availability of our products
to additional users through training and rollout initiatives within an
organization. They also provide technical consulting which may be requested,
such as the customization of Web pages for large clients or the building of
prototype applications using AppLink.
As of December 31, 1999, we had six telephone-based customer support
representatives in the US and one in the UK. These representatives operate the
telephone help desk that is open from 8:00 a.m. to 8:00 p.m., local time, Monday
through Friday.
WEBSITE TECHNOLOGY AND OPERATIONS
The OneSource on-line site is located at a dedicated hosting facility
managed by GTE/BBN Internetworking. It is a node on the GTE/BBN Internet
backbone. The system is available 24 hours a day, seven days a week.
The engineering team closely monitors the usage, delivery performance and
availability of the system. Particular attention is paid to individual product
usage, relative levels of customer activity, speed of data retrieval and
delivery, peak usage figures, uptime statistics and power requirements.
COMPETITION
The business information services industry is intensely competitive. We
face direct or indirect competition from numerous companies.
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- large, well-established business and financial information providers
such as Dow Jones, Dialog, Lexis-Nexis, Pearson, Reuters, Factiva,
Thomson, Primark and McGraw-Hill
- on-line information services or Websites targeted to specific markets
or applications, such as NewsEdge, Factset and Bloomberg
- providers of sales, marketing and credit information such as Dun &
Bradstreet
- Web retrieval, Web "portal" companies and other free or low-cost mass
market on-line services such as Excite, Infoseek, Lycos, Yahoo! and
AOL/Netscape
- free or low-cost specialized business and financial information
Websites such as Hoovers.com, Marketwatch.com, Multex.com and
TheStreet.com
The principal competitive factors in our industry are availability of
comprehensive and integrated business and financial information, ease of use,
support and training required and price/performance characteristics.
EMPLOYEES
We had 231 full-time employees as of December 31, 1999, including 102 in
sales and marketing, 18 in engineering, 19 in production/on-line support, 26 in
finance and administration and 66 on our Global Strategic Web Applications Team.
Our employees are not represented by any collective bargaining organization. We
have never experienced a work stoppage and we believe our relationships with our
employees are good.
ITEM 2. Properties
OneSource's headquarters are currently in approximately 50,900 square feet
of office space located in Concord, Massachusetts. The office space has been
leased through 2004. We lease additional sales offices in Chicago, New York, San
Francisco, Texas and Woking and London, England. OneSource believes that its
existing facilities are adequate to meet current requirements, and that suitable
additional or substitute space will be available as needed.
OneSource deems the buildings, machinery and equipment used in its
operations (whether owned or leased), generally to be in good condition and
adequate for the purposes for which they are used.
ITEM 3. Legal Proceedings
OneSource is not a party to any material legal proceedings.
ITEM 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of our security holders during the
fourth quarter of the year ended December 31, 1999.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
OneSource's common stock is traded on the NASDAQ National Market System
under the symbol "ONES". Public trading of OneSource's common stock commenced on
May 19, 1999.
(A) Market Price of Common Stock
The following table sets forth the high and low closing prices as reported
by the NASDAQ National Market.
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1999
-----------------
HIGH LOW
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May 19, 1999 - June 30, 1999............................... $14.25 $7.22
Third quarter ended September 30, 1999..................... 10.38 6.63
Fourth quarter ended December 31, 1999..................... 14.00 7.50
</TABLE>
The quotations represent inter-dealer quotations, without adjustments for
retail markups, markdowns, or commissions, and may not necessarily represent
actual transactions. The number of record holders of OneSource's common stock at
March 1, 2000 was 86.
(B) Use of Proceeds from Sales of Registered Securities
OneSource has not declared or paid any cash dividends on its common stock
and presently intends to retain its future earnings, if any, to fund the
development and growth of its business and, therefore, does not anticipate
paying any cash dividends in the foreseeable future.
In May 1999, OneSource completed an initial public offering, (the
"offering") of 3,636,000 shares of its common stock, of which 2,500,000
shares were issued and sold by OneSource and 1,136,000 shares were
issued and sold by certain stockholders of OneSource.
The net proceeds to OneSource from the Offering, after deducting
underwriting discounts and commissions and other offering expenses was
approximately $27.0 million.
The net proceeds from the Offering, less $6.8 million used to payoff
long-term debt and $7.6 million used to acquire Corporate Technology have been
invested in interest bearing, investment grade securities.
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(C) Recent Sales of Unregistered Securities
During the year ended December 31, 1999, OneSource issued the following
securities that were not registered under the Securities Act of 1933, as
amended:
GRANTS OF STOCK OPTIONS
In February 1999, OneSource granted options to purchase 40,700 shares of
its common stock at an exercise price of $2.19 per share, 30,525 shares of its
common stock at an exercise price of $5.90 per share and 329,467 shares of its
common stock at an exercise price of $9.93 per share.
EXERCISE OF STOCK OPTIONS
From January 1, 1999 to December 31, 1999, OneSource issued 415,538 shares
of its common stock at exercise prices ranging from $0.12 to $2.18 for an
aggregate purchase price of approximately $419,000 pursuant to the exercise of
employee stock options.
No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Securities Act set forth in Rule 701 promulgated thereunder. All shares
issuable upon exercise of stock options have been registered by OneSource on a
Registration Statement on Form S-8.
ITEM 6. Selected Consolidated Financial and Operating Data
The following historical selected consolidated financial and operating data
has been derived from audited Consolidated Financial Statements for each of the
five years in the period ended December 31, 1999. The following consolidated
financial data should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this Annual
Report on Form 10-K.
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Year ended December 31,
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1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(In thousands, except per share data)
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STATEMENT OF OPERATIONS DATA:
Revenues:(1)
Web-based product ......................... $ 31,822 $ 16,058 $ 3,312 $ 15 $ --
CD Rom product ............................ 3,726 14,370 27,072 30,419 28,957
-------- -------- -------- -------- --------
35,548 30,428 30,384 30,434 28,957
-------- -------- -------- -------- --------
Cost of revenues:
Web-based product ......................... 13,143 7,863 2,401 295 --
CD Rom product ............................ 1,666 5,792 10,444 12,244 11,520
-------- -------- -------- -------- --------
14,809 13,655 12,845 12,539 11,520
-------- -------- -------- -------- --------
Gross profit .............................. 20,739 16,773 17,539 17,895 17,437
-------- -------- -------- -------- --------
Operating expenses:
Selling and marketing ..................... 13,254 11,577 9,167 8,572 8,705
Platform and product development .......... 7,996 6,313 6,375 7,252 6,585
General and administrative ................ 5,474 3,847 3,401 3,664 5,163
Amortization of intangible assets ......... 376 -- -- -- --
-------- -------- -------- -------- --------
Total operating expenses ............. 27,100 21,737 18,943 19,488 20,453
-------- -------- -------- -------- --------
Loss from operations ................. (6,361) (4,964) (1,404) (1,593) (3,016)
Interest income (expense), net ................. 47 (595) (930) (733) (633)
Gain on sale of product line ................... -- 12,797 501 -- --
Other income ................................... 2,000 -- -- 393 --
-------- -------- -------- -------- --------
Income (loss) before income taxes..... (4,314) 7,238 (1,833) (1,933) (3,649)
Provision for income taxes ..................... 133 250 -- -- --
-------- -------- -------- -------- --------
Net income (loss) .................... (4,447) 6,988 (1,833) (1,933) (3,649)
Less: income attributable to Class P
common stock ................................. -- 1,367 414 335 104
-------- -------- -------- -------- --------
Net income (loss) attributable to
common stock ....................... $ (4,447) $ 5,621 $ (2,247) $ (2,268) $ (3,753)
======== ======== ======== ======== ========
Earnings (loss) per share:(2)
Class P common stock:
Basic and diluted earnings
per share ............................... -- $ 1.91 $ 0.57 $ 0.47 $ 0.14
Weighted average Class P
common shares outstanding ............... -- 718 718 719 723
Common stock:
Basic earnings (loss) per share ........... $ (0.50) $ 0.85 $ (0.34) $ (0.35) $ (0.57)
Diluted earnings (loss) per share ......... $ (0.50) $ 0.59 $ (0.34) $ (0.35) $ (0.57)
Weighted average common
shares outstanding:
Basic ................................ 8,822 6,641 6,545 6,487 6,523
Diluted .............................. 8,822 9,563 6,545 6,487 6,523
Pro forma loss per share:(2)
Basic and diluted ......................... $ (0.48)
Weighted average common
shares outstanding:
Basic and diluted .................... 9,200
</TABLE>
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<TABLE>
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December 31,
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1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(In thousands, except number of customers data)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ............... $ 13,598 $ 8,665 $ 341 $ 535 $ 966
Working capital (deficit) ............... (691) (2,118) (9,792) (8,803) (7,499)
Total assets ............................ 49,698 27,646 16,644 16,934 16,567
Total debt (including capital
lease obligations) .................... 234 6,936 8,171 6,661 6,223
Deferred revenues ....................... 24,222 18,022 15,748 15,419 14,160
Total stockholders' equity (deficit)..... 13,363 (6,311) (13,613) (11,827) (9,757)
OTHER DATA FOR WEB-BASED PRODUCTS:
Annualized contract value(3) ............ $ 38,743 $ 25,920 $ 8,973 $ 412 --
Number of customers ..................... 583 445 233 11 --
Average annualized contract value
per customer .......................... $ 66.5 $ 58.2 $ 38.5 $ 37.4 --
</TABLE>
(1) In 1997 and 1998, OneSource divested two CD Rom product lines. Revenues
attributable to these divested product lines, which are included in the
statement of operations data through the divestiture date, were $2.6
million, $6.3 million, $6.4 million and $6.0 million in the years ended
December 31, 1998, 1997, 1996 and 1995, respectively.
(2) You should read Notes 2 and 7 to the Consolidated Financial Statements for
further description of the calculation of these items.
(3) Annualized contract value represents the invoiced fees for one month for
all customer contracts for Web-based products in effect at the measurement
date, multiplied by 12, without regard to the actual remaining duration of
such contracts. For more information regarding annualized contract value,
see "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Annualized Contract Value."
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This section should be read in conjunction with the Selected Consolidated
Financial and Operating Data and OneSource's Consolidated Financial Statements
and the Notes thereto appearing elsewhere in this Annual Report on Form 10-K.
The following discussion contains forward-looking statements that involve
risks and uncertainties. OneSource makes such forward-looking statements under
the provision of the "Safe Harbor" section of the Private Securities Litigation
Reform Act of 1995. Any forward-looking statements should be considered in light
of the factors described below in Item 7 under "Factors that May Affect Future
Results." Actual results may vary materially from those projected, anticipated
or indicated in any forward-looking statements. In this Annual Report on Form
10-K, the words "anticipates," "believes,"
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<PAGE> 16
"expects," "intends," "future," "could," and similar words or expressions (as
well as other words or expressions referencing future events, conditions or
circumstances) identify forward-looking statements.
OVERVIEW
OneSource provides Web-based business and financial information to
professionals who need quick access to reliable corporate, industry and market
intelligence. OneSource was formed as a division of Lotus Development
Corporation in 1987 and became an independent company when it was purchased in a
management buy-out in 1993. Until December 1996, our business was to provide
business information to the financial community using CD Rom technology as the
primary method of distribution. The introduction of Business Browser in December
1996 marked a fundamental shift in our business as we began a transition away
from our legacy CD Rom business and toward Web-based products.
On October 1, 1999, OneSource acquired Corporate Technology a Delaware
corporation located in Woburn, Massachusetts. Corporate Technology is a provider
of high technology company profiles with a focus on emerging private companies.
Pursuant to the terms of an Agreement and Plan of Merger, the consideration paid
by OneSource was $7.6 million in cash. A portion of the cash consideration is
being held in escrow to be released in accordance with the Agreement and Plan of
Merger and an Escrow Agreement. For financial statement purposes, this
acquisition was accounted for as a purchase and, accordingly, the results of
operations of Corporate Technology subsequent to October 1, 1999 have been
included in OneSource's consolidated statements of operations. Prior to being
acquired, Corporate Technology had revenues of $4.4 million and $4.9 million in
the nine months ended September 30, 1999 and the year ended December 31, 1998,
respectively.
In May 1998, we sold our CD-Insurance division to allow us to focus more
completely on our new Web-based product line. We recognized a gain of $12.8
million on this sale during 1998. In addition, in connection with the
disposition, we licensed certain of our CD Rom software to the acquirer in
exchange for $4.0 million of license fees. These license fees will be paid in
eight equal quarterly installments beginning January 1, 1999 and running through
December 31, 2000 and will be recognized ratably as other income. For the year
ended December 31, 1999, OneSource recorded $2.0 million of other income related
to the software license agreement.
Our revenues for both CD Rom and Web-based products consist of monthly
subscription fees from customer contracts. Customer contracts span varying
periods of time but are generally for one year, are renewable for like periods,
and are payable in advance. Subscription fees generally are quoted to clients on
an annual basis but are earned as revenues on a monthly basis over the
subscription period. Invoices are recorded as accounts receivable until paid and
as deferred revenues until earned. Deferred revenues attributable to Web-based
products increased 43% to $22.8 million as of December 31, 1999 from $15.9
million as of December 31, 1998 and increased 375% from $4.8 million as of
December 31, 1997.
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<PAGE> 17
Cost of revenues consists primarily of royalties to information providers
and, to a lesser extent, employee salaries and benefits, facilities allocation
and related expenses, depreciation associated with computers for data processing
and on-line requirements and Web hosting expenses. We enter into contracts with
our information providers which are generally for a term of at least one-year
and are automatically renewable if not canceled with advance notice. These
contracts may be terminated under certain circumstances. Under these
arrangements, royalties are generally paid on a quarterly basis to information
providers. Royalties generally are calculated either as a flat percentage of our
revenues or as a per-user fee that declines as the number of authorized users of
the product increases. In limited cases, we pay a fixed fee per period.
Selling and marketing expense consists primarily of employee salaries and
benefits and sales commissions paid to our sales force, customer support
organization and marketing personnel, as well as facilities allocation and
related expenses, direct marketing promotional materials, trade show exhibitions
and advertising. Sales commissions are paid when customers are invoiced and are
recorded as deferred subscription costs, which are amortized ratably over the
term of the contract, typically 12 months, as the associated revenues are
recognized. All other selling and marketing costs are expensed as incurred.
Platform and product development expense consists primarily of employee
salaries and benefits, facilities allocation and related expenses, as well as
outside contractor expenses, relating to the development of our "platform" of
core software supporting our products and the development of new products based
upon that platform. Platform and product development expense includes expenses
relating to the editorial staff that implements our KeyID technology to
integrate disparate information sources into our Web-based products.
General and administrative expense consists primarily of employee salaries
and benefits, facilities allocation and related expenses associated with
OneSource's management, finance, human resources, management information systems
and administrative groups.
Results of Operations
The following table sets forth, for the periods indicated, the percentage
of total revenues represented by each line item in OneSource's consolidated
statement of operations. We can give no assurance that the indicated trends in
revenues or operating results will continue in the future.
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<PAGE> 18
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------
1999 1998 1997
---- ---- ----
(Percentage of total revenues)
<S> <C> <C> <C>
Revenues:
Web-based product .................... 90% 53% 11%
CD Rom product ....................... 10 47 89
---- ---- ----
Total revenues .................. 100 100 100
---- ---- ----
Cost of revenues:
Web-based product .................... 37 26 8
CD Rom product ....................... 5 19 34
---- ---- ----
Total cost of revenues .......... 42 45 42
---- ---- ----
Gross profit .............................. 58 55 58
Operating expenses:
Selling and marketing ................ 37 38 30
Platform and product development ..... 23 21 21
General and administrative ........... 15 12 11
Amortization of intangible assets..... 1 -- --
---- ---- ----
Loss from operations ...................... (18) (16) (4)
Interest expense, net ..................... -- (2) (3)
Gain on sale of product line .............. -- 42 1
Other income .............................. 6 -- --
---- ---- ----
Income (loss) before income taxes ......... (12) 24 (6)
Provision for income taxes ................ -- 1 --
---- ---- ----
Net income (loss) ......................... (12)% 23% (6)%
==== ==== ====
</TABLE>
COMPARISON OF RESULTS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Revenues. Total revenues increased 17% to $35.5 million for the year ended
December 31, 1999 from $30.4 million for the year ended December 31, 1998. In
May 1998, OneSource sold its CD-Insurance division. Revenues from this product
line were $2.6 million for the year ended December 31, 1998. On October 1, 1999,
OneSource acquired Corporate Technology; thereafter, revenues for the year ended
December 31, 1999 include $1.0 million of revenue recognized from products and
customers related to the acquired Corporate Technology business. Excluding the
CD-Insurance division and Corporate Technology revenues, total revenues for the
year ended December 31, 1999 increased by 24%.
Web-based product revenues increased by 98% to $31.8 million for the year
ended December 31, 1999 from $16.1 million for the year ended December 31, 1998.
The increase was attributable to new customers, an increase in the number of
user seats purchased by existing customers and the sale of new products to
existing customers. At the same time, CD Rom product revenues decreased by 74%
to $3.7 million in 1999 from
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<PAGE> 19
$14.4 million in 1998 as OneSource continued its transition away from its legacy
CD Rom business.
Cost of Revenues. Total cost of revenues increased 8% to $14.8 million for
the year ended December 31, 1999 from $13.7 million for the year ended December
31, 1998. As a percentage of total revenues, total cost of revenues decreased to
42% in 1999 from 45% in 1998. The decrease in total cost of revenues percentage
was principally due to a decreased effective royalty rate for our Web-based
products, which resulted from the renegotiation of some information provider
agreements to lower royalty rates and contracts where effective royalty rates
decline as the number of seats sold to a customer increase.
Cost of Web-based product revenues increased 67% to $13.1 million for the
year ended December 31, 1999 from $7.9 million for the year ended December 31,
1998. As a percentage of Web-based product revenues, cost of Web-based product
revenues decreased to 41% in 1999 from 49% in 1998, due to an increase in our
customer base as well as more favorable royalty rates.
Cost of CD Rom product revenues decreased 71% to $1.7 million for the year
ended December 31, 1999 from $5.8 million for the year ended December 31, 1998.
This decrease was due to lower revenues reflecting our shift away from the CD
Rom product line. As a percentage of CD Rom product revenues, cost of CD Rom
product revenues increased to 45% in 1999 from 40% in 1998.
Selling and Marketing Expense. Selling and marketing expense increased 14%
to $13.3 million for the year ended December 31, 1999 from $11.6 million for the
year ended December 31, 1998 principally due to increased headcount and expenses
incurred to hire and train new sales personnel in connection with our Business
Browser product line. Selling and marketing expense decreased as a percentage of
total revenues to 37% in 1999 from 38% in 1998. We expect sales and marketing
expenses to increase as we continue to hire additional sales personnel.
Platform and Product Development Expense. Platform and product development
expense increased 27% to $8.0 million for the year ended December 31, 1999 from
$6.3 million for the year ended December 31, 1998. As a percentage of total
revenues, platform and product development expense increased from 21% to 22%.
The increase was due principally to additional headcount to meet new product
demands.
General and Administrative Expense. General and administrative expense
increased 42% to $5.5 million for the year ended December 31, 1999 from $3.8
million for the year ended December 31, 1998. The increase primarily relates to
payments to terminate certain arrangements upon the completion of our initial
public offering in May 1999. These expenses included termination fees of $0.5
million to each of William Blair Venture Partners III Limited Partnership and an
affiliate of Information Partners Capital Fund, L.P. in connection with our
public offering, financial advisory fees of $0.2 million and relocation expenses
of our headquarters of $0.1 million. General and
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<PAGE> 20
administrative expense increased as a percentage of total revenues to 15% in
1999 from 12% in 1998.
Amortization of Intangible Assets. Amortization of intangible assets
expense for the year ended December 31, 1999 was $0.4 million. The increase is
the result of the acquisition of Corporate Technology in October 1999 and the
associated amortization of intangible assets acquired as part of that
transaction.
Interest Income, Net. Interest income, net of interest expense, was $47,000
for the year ended December 31, 1999 compared to $595,000 of net interest
expense for the year ended December 31, 1998. This increase is primarily due to
an increase in interest income related to the invested cash balance from the
initial public offering proceeds and the sale of the CD-Insurance division, as
well as a reduction in interest expense following the payoff of long-term debt
in May 1999. OneSource recognized a one-time expense of $0.3 million relating to
the unamortized portion of the original issue discount when we paid the
outstanding balance on long-term debt in the principal amount of $6.3 million
from the proceeds of our initial public offering.
Other Income. Other income increased $2.0 million for the year ended
December 31, 1999 and was attributable to revenues from a software license
agreement entered in connection with the sale of our CD-Insurance division.
Gain on Sale of Product Line. As the result of the sale of the CD-Insurance
division, we recorded a gain of $12.8 million for the year ended December 31,
1998.
Provision for Income Taxes. The provision for income taxes for the year
ended December 31, 1999 was $133,000 and related to amounts due for state and
franchise taxes. The provision for income taxes for the year ended December 31,
1998 was $250,000 and related to the gain on the sale of the CD-Insurance
division.
COMPARISON OF RESULTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Revenues. Total revenues remained at approximately the same level of $30.4
million for each of the years ended December 31, 1998 and 1997. In May 1998,
OneSource sold its CD-Insurance division. Revenues from this product line were
$2.6 million for the year ended December 31, 1998 compared to $6.6 million for
the year ended December 31, 1997. Excluding these revenues from total revenues
for each period, total revenues for the year ended December 31, 1998 increased
by 17%.
Web-based product revenues increased by 385% to $16.1 million for the year
ended December 31, 1998 from $3.3 million for the year ended December 31, 1997.
The increase was attributable to new customers, an increase in the number of
user seats purchased by existing customers and the sale of new products to
existing customers. At the same time, CD Rom product revenues decreased by 47%
to $14.4 million in 1998
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<PAGE> 21
from $27.1 million in 1997 as OneSource continued its transition away from its
legacy CD Rom business.
Cost of Revenues. Total cost of revenues increased 6% to $13.7 million for
the year ended December 31, 1998 from $12.8 million for the year ended December
31, 1997. As a percentage of total revenues, total cost of revenues increased to
45% in 1998 from 42% in 1997. The increase in total cost of revenues was
principally due to increased royalty expense for our Web-based products. It was
offset partially by a decrease in our costs of revenues relating to the CD Rom
product line.
Cost of Web-based product revenues increased 227% to $7.9 million for the
year ended December 31, 1998 from $2.4 million for the year ended December 31,
1997. As a percentage of Web-based product revenues, cost of Web-based product
revenues decreased to 49% in 1998 from 72% in 1997, due to an increase in our
customer base. Royalty expense increased as a result of growth in Business
Browser product line revenues and number of user seats sold.
Cost of CD Rom product revenues decreased 45% to $5.8 million for the year
ended December 31, 1998 from $10.4 million for the year ended December 31, 1997.
This decrease was due to decreased revenues reflecting our shift away from the
CD Rom product line. As a percentage of CD Rom product revenues, cost of CD Rom
product revenues increased to 40% in 1998 from 39% in 1997.
Selling and Marketing Expense. Selling and marketing expense increased 26%
to $11.6 million for the year ended December 31, 1998 from $9.2 million for the
year ended December 31, 1997 principally due to increased expenses incurred to
hire new sales personnel and to train new and existing personnel in connection
with our transition to our new Business Browser product line. Selling and
marketing expense increased as a percentage of total revenues to 38% in 1998
from 30% in 1997.
Platform and Product Development Expense. Platform and product development
expense decreased 1% to $6.3 million for the year ended December 31, 1998 from
$6.4 million for the year ended December 31, 1997, although as a percentage of
total revenues it remained constant at 21%. The decrease was due principally to
the decrease in salary expense resulting from the elimination of CD-Insurance
product development staff in May 1998 upon the sale of that division and the
elimination of several CD Rom product management positions. This decrease in
salary expense was offset by increased headcount in the Global Strategic Web
Applications Team to meet new product demands.
General and Administrative Expense. General and administrative expense
increased 13% to $3.8 million for the year ended December 31, 1998 from $3.4
million for the year ended December 31, 1997 principally due to increased
headcount in management information systems and human resources for
infrastructure required to accommodate the growth in our business. General and
administrative expense increased as a percentage of total revenues to 12% in
1998 from 11% in 1997.
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<PAGE> 22
Interest Expense, Net. Interest expense, net of interest income, decreased
36% to $0.6 million for the year ended December 31, 1998 from $0.9 million for
the year ended December 31, 1997 due to an increase in interest income related
to invested cash balances from the sale of the CD-Insurance division line in May
1998.
Gain on Sale of Product Line. As a result of the sale of the CD-Insurance
division, we recorded a gain of $12.8 million. This gain reflects cash proceeds
received of $11.0 million together with recognition of deferred revenues of $3.1
million and $0.6 million of deferred subscription costs due to the transfer of
related service obligations, net of transaction related expenses.
Provision for Income Taxes. The provision for income taxes for the year
ended December 31, 1998 was $0.3 million and is directly related to the gain on
the sale of the CD-Insurance division. Although the gain on the sale created
significant taxable income for 1998, such gain was largely offset by utilizing
our net operating loss carryforwards.
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following tables set forth a summary of OneSource's unaudited quarterly
operating results for each of the eight quarters in the two-year period ended
December 31, 1999. This information has been derived from unaudited interim
consolidated financial statements that, in the opinion of management, have been
prepared on a basis consistent with the Consolidated Financial Statements
appearing elsewhere in this Annual Report on Form 10-K and include all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair statement of such information when read in conjunction with OneSource's
Consolidated Financial Statements and the Notes thereto. Our operating results
for any quarter are not necessarily indicative of results for any future period.
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<PAGE> 23
<TABLE>
<CAPTION>
Quarter ended
---------------------------------------------------------------------------------------------
1999 1998
-------------------------------------------- --------------------------------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
-------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (In thousands)
Revenues:
Web-based product ................ $ 9,023 $ 8,383 $ 7,513 $ 6,903 $ 5,532 $ 4,479 $ 3,419 $ 2,628
CD Rom product ................... 1,284 335 867 1,240 2,050 2,725 4,273 5,322
-------- -------- -------- -------- -------- -------- -------- --------
Total revenues ...................... 10,307 8,718 8,380 8,143 7,582 7,204 7,692 7,950
-------- -------- -------- -------- -------- -------- -------- --------
Cost of revenues:
Web-based product ................ 3,376 3,466 3,331 2,970 2,634 2,070 1,872 1,287
CD Rom product ................... 628 197 354 487 1,011 1,159 1,643 1,979
-------- -------- -------- -------- -------- -------- -------- --------
Total cost of revenues .............. 4,004 3,663 3,685 3,457 3,645 3,229 3,515 3,266
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit ........................ 6,303 5,055 4,695 4,686 3,937 3,975 4,177 4,684
-------- -------- -------- -------- -------- -------- -------- --------
Operating expenses:
Selling and marketing ............ 4,049 3,284 2,994 2,927 3,015 2,861 2,904 2,797
Platform and product development.. 2,257 2,074 1,947 1,718 1,586 1,638 1,528 1,561
General and administrative ....... 1,289 1,068 2,257 860 942 897 1,051 957
Amortization of intangible assets. 376 -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total operating expenses .... 7,971 6,426 7,198 5,505 5,543 5,396 5,483 5,315
-------- -------- -------- -------- -------- -------- -------- --------
Loss from operations ................ $ (1,668) $ (1,371) $ (2,503) $ (819) $ (1,606) $ (1,421) $ (1,306) $ (631)
======== ======== ======== ======== ======== ======== ======== ========
(Percentage of total revenues)
Revenues:
Web-based product ................ 88% 96% 90% 85% 73% 62% 44% 33%
CD Rom product ................... 12 4 10 15 27 38 56 67
-------- -------- -------- -------- -------- -------- -------- --------
Total revenues ...................... 100 100 100 100 100 100 100 100
-------- -------- -------- -------- -------- -------- -------- --------
Cost of revenues:
Web-based product ................ 33 40 40 36 35 29 24 16
CD Rom product ................... 6 2 4 6 13 16 22 25
-------- -------- -------- -------- -------- -------- -------- --------
Total cost of revenues .............. 39 42 44 42 48 45 46 41
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit ........................ 61 58 56 58 52 55 54 59
-------- -------- -------- -------- -------- -------- -------- --------
Operating expenses:
Selling and marketing ............ 39 38 36 36 40 40 38 35
Platform and product development.. 22 24 23 21 21 23 20 20
General and administrative ....... 12 12 27 ll 12 12 13 12
Amortization of intangible assets. 4 -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total operating expenses .... 77 74 86 68 73 75 71 67
-------- -------- -------- -------- -------- -------- -------- --------
Loss from operations ................ (16)% (16)% (30)% (10)% (21)% (20)% (17)% (8)%
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
ANNUALIZED CONTRACT VALUE
One measure of the performance of our business is "annualized contract
value." This is a measurement we use for normalized period-to-period comparisons
to indicate business volume and growth, both in terms of new customers and
upgrades and expansions at existing customers. Our presentation and calculation
of annualized contract value may not be comparable to similarly titled measures
used by other companies. It is
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<PAGE> 24
not an absolute indicator and we cannot guarantee that any annualized contract
value will be ultimately realized as revenues.
We use annualized contract value as a measure of our business because it
shows the growth or decline in our customer base in a way that revenues cannot.
Since our business is a subscription business, revenues are recognized not when
a sale is made, but in ratable portions over the term of the subscription (which
is usually twelve months). As a result, from a revenue viewpoint the addition or
loss of even a major customer contract may not have a dramatic impact on a
quarter-to-quarter basis. On the other hand, by looking at the value of customer
contracts in hand at the end of each quarter, we can more readily see trends in
our business. For example, the addition of a one-year subscription contract with
total payments of $1.0 million may only increase revenues by approximately
$250,000 ($1.0 million divided by four) in the quarter in which the sale is
made, but would increase annualized contract value by $1.0 million. Similarly,
if the customer did not renew that contract, revenues in the next quarter would
only decrease by $250,000, while annualized contract value would decrease by
$1.0 million.
In calculating annualized contract value, we include only those contracts
where the customer has actually been invoiced. Since amounts invoiced are
included in deferred revenues on our balance sheet for all customer contracts
with terms extending beyond the month of invoice, this demonstrates that
annualized contract value is based on actual customer contracts reflected in our
historical financial statements. To compute annualized contract value, we
multiply by twelve the total amount of fees invoiced for one month and included
in deferred revenues. Annualized contract value is not intended to be an
absolute indicator of future revenues. We only annualize existing, invoiced
contracts, but we do so without regard to the remaining term of those contracts.
Most of our contracts are for 12 months, but as of the date that we calculate
annualized contract value the remaining term of nearly all of our contracts will
be less than 12 months. If a customer fails to pay its invoiced fees or
terminates the contract or if we are unable to renew a contract, our revenues in
subsequent periods may be less than expected based solely on annualized contract
values. Conversely, if we add additional customers or renew existing contracts
at higher rates, our revenues in future periods may exceed expectations based
solely on annualized contract value.
The calculation of annualized contract value for our Web-based products is
illustrated below:
<TABLE>
<CAPTION>
ONE MONTH
OF INVOICED
WEB-BASED FEES IN
DEFERRED DEFERRED ANNUALIZED
MEASUREMENT DATE REVENUES REVENUES CONTRACT VALUE
- ---------------- --------- ----------- --------------
(In thousands)
<S> <C> <C> <C>
December 31, 1998............. $ 15,935 $2,160.0 $25,920
December 31, 1999............. 22,781 3,228.6 38,743
</TABLE>
We have increased annualized contract value attributable to Web-based
products 49% to $38.7 million as of December 31, 1999 from $25.9 million as of
December 31, 1998. The number of Web-based customers has increased 31% to 583 at
December 31, 1999
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<PAGE> 25
from 445 at December 31, 1998. At the same time, the average annualized contract
value of all Web-based product customers has increased 14% to $66,500 per
customer at December 31, 1999 from $58,200 per customer at December 31, 1998.
This growth was attributable to an increase in the number of user seats
purchased by customers and the addition of new products.
LIQUIDITY AND CAPITAL RESOURCES
Since acquiring our business from Lotus Development Corporation in 1993, we
have funded our operations through a combination of seller financing, proceeds
received from the sale of Class P common stock and common stock in connection
with the purchase of the business from Lotus Development Corporation, bank debt,
proceeds received from the sale of non-strategic lines of business, capitalized
equipment leases, cash flows from operations and our initial public offering
which closed in May 1999.
Our cash and cash equivalents totaled $13.6 million at December 31, 1999,
compared to $8.7 million at December 31, 1998, an increase of $4.9 million
primarily due to the receipt of net proceeds of $26.9 million from our initial
public offering in May 1999, less funds used to acquire Corporate Technology and
to retire outstanding long-term debt.
Net cash used in operating activities was $0.6 million for the year ended
December 31, 1999, as compared to net cash provided by operating activities of
$1.2 million for the year ended December 31, 1998.
Net cash used in investing activities was $11.1 million for the year ended
December 31, 1999, as compared to net cash provided by investing activities of
$9.0 million for the year ended December 31, 1998. Cash used in investing
activities was primarily from the acquisition of Corporate Technology for $7.6
million and purchases of property and equipment for $2.8 million during the year
ended December 31, 1999. Cash generated in investing activities for the year
ended December 31, 1998 reflects net cash proceeds from the sale of our
CD-Insurance division.
Net cash provided by financing activities was $16.7 million for the year
ended December 31, 1999, as compared to net cash used by financing activities of
$2.0 million for the year ended December 31, 1998. Net cash provided by
financing activities in 1999 primarily consisted of net proceeds from the sale
of common stock in our initial public offering, offset in part by the repurchase
and retirement of common stock, repayments of debt and capital lease
obligations. Net cash used in financing activities in 1998 reflected primarily
repayments of our line of credit and capital lease obligations.
We do not currently have a line of credit but intend to enter into a
revolving line of credit for letters of credit and general working capital.
We believe that the net proceeds from our initial public offering, together
with our current cash and cash equivalents and funds anticipated to be generated
from operations,
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<PAGE> 26
will be sufficient to satisfy working capital and capital expenditure
requirements for at least the next twelve months.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This standard establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. SFAS No.133 requires companies to
recognize all derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for changes in fair value, gains, or
losses, depends on the intended use of the derivative and its resulting
designation. In June 1999, the FASB issued SFAS No. 137 that defers the
effective date of adoption of SFAS No. 133 to fiscal years beginning after June
15, 2000. Management believes the effect of adoption SFAS No. 133 will not have
a significant impact on its financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB No. 101"), "Revenue Recognition in Financial
Statements". SAB No. 101 provides guidance on applying generally accepted
accounting principles to revenue recognition issues in financial statements.
OneSource will adopt SAB No. 101 as required in the first quarter of 2000 and is
evaluating the effect that such adoption may have on its consolidated results of
operations and financial position.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This Annual Report on Form 10-K contains forward-looking statements which
involve risks and uncertainties. OneSource's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including without limitation, those set forth in the
following risk factors and elsewhere in this Annual Report on Form 10-K. In
addition to the other information included or incorporated by reference in this
Annual Report on Form 10-K, the following risk factors should be considered
carefully in evaluating OneSource and its business.
ONESOURCE MAY NOT BE ABLE TO RETAIN KEY EMPLOYEES OF CORPORATE TECHNOLOGY.
Key founders and some employees of Corporate Technology, several of whom were
large stockholders, received a substantial cash payment upon closing of the
acquisition. In certain cases, these individuals may be financially independent.
Additionally, startup and other companies will seek out these individuals due to
the financial result they have achieved for Corporate Technology. Under the
circumstances, OneSource faces a difficult and significant task of retaining and
motivating the key personnel of Corporate Technology to stay committed to
OneSource.
WE WILL INCUR SUBSTANTIAL CHARGES AGAINST EARNINGS IN CONNECTION WITH THE
ACQUISITION OF CORPORATE TECHNOLOGY.
-26-
<PAGE> 27
Significant merger-related charges against earnings increased OneSource's losses
in the fourth quarter of fiscal year 1999 and during the post-merger integration
period. We expect to incur charges of approximately $0.5 million in connection
with the acquisition that relate to other integration costs. These costs may be
higher than we anticipate. In addition, we may incur other unanticipated
acquisition costs. These costs may delay the anticipated benefits of the
acquisition. Nonrecurring expenses will be recorded in the period incurred.
SUBSCRIBERS OF ONESOURCE AND CORPORATE TECHNOLOGY MAY NOT RENEW THEIR
SUBSCRIPTIONS AS A RESULT OF CONCERNS OVER THE ACQUISITION. The closing of the
acquisition could cause subscribers of OneSource and Corporate Technology to
allow their subscriptions to lapse as a result of concerns over product
evolution, integration and support of the combined company's products. These
non-renewals could have a material adverse effect on the business, operating
results and financial condition of OneSource or Corporate Technology.
WE HAVE A LIMITED OPERATING HISTORY WITH BUSINESS BROWSER ON WHICH TO
EVALUATE OUR PROSPECTS. We began operations as an independent company in 1993.
We began to migrate our business to the Web from CD Rom-based products in early
1996, and launched the Web-based Business Browser product line in December 1996.
Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies transitioning to a new product
line, particularly companies in the new and rapidly evolving market for Internet
and Web-based business information products.
OUR BUSINESS BROWSER PRODUCTS HAVE NOT BEEN PROFITABLE AND MAY NOT BECOME
PROFITABLE IN THE FUTURE. We incurred losses from operations of approximately
$1.6 million in 1996, $1.4 million in 1997, $5.0 million in 1998 and $6.4
million for the year ended December 31, 1999. In addition, we have not reached
the critical mass of users of Web-based products, which we believe is necessary
to leverage effectively our royalty payments and infrastructure expenses to
become profitable. As of December 31, 1999, we had an accumulated deficit of
$14.9 million.
WE RELY ON OUR BUSINESS BROWSER PRODUCT LINE, AND WE WILL NOT SUCCEED
UNLESS DEMAND FOR OUR BUSINESS BROWSER PRODUCTS CONTINUES TO GROW. Subscription
revenues from our Business Browser product line accounted for 90% of total
revenues in 1999, 53% of total revenues in 1998 and 11% in 1997. These
subscription revenues accounted for 97% of our total annualized contract value
at the end of 1999, 83% at the end of 1998 and 29% at the end of 1997. We have
phased out CD Rom products that are not part of the Business Browser product
line. As a result, our future financial condition will depend heavily on the
success or failure of our Business Browser product line. Business Browser
products were introduced in December 1996 and it is difficult to predict demand
and market acceptance for these products in the new and rapidly evolving
Web-based business information services market. If the demand for Business
Browser products does not grow, whether due to competition, lack
-27-
<PAGE> 28
of market acceptance, failure of Internet or Web use to grow in general,
technological change or other factors, our business would suffer significantly.
ANNUALIZED CONTRACT VALUE MAY NOT BE AN ACCURATE INDICATION OF OUR
PERFORMANCE. We use "annualized contract value" as a measurement for normalized
period-to-period comparisons to indicate business volume and growth. Our
presentation and calculation of annualized contract value may not be comparable
to similarly titled measures used by other companies. It is not an absolute
indicator and we cannot guarantee that any annualized contract value will be
ultimately realized as revenues.
COMPETITION IN OUR INDUSTRY IS INTENSE AND MANY OF OUR COMPETITORS HAVE
GREATER RESOURCES THAN WE DO; THIS COMPETITION MAY ADVERSELY AFFECT OUR
FINANCIAL RESULTS. The business information services industry is intensely
competitive. We face direct or indirect competition from the following types of
companies:
- large, well-established business and financial information providers
such as Dow Jones, Dialog, Lexis-Nexis, Pearson, Reuters, Factiva,
Thomson, Primark and McGraw-Hill
- on-line information services or Websites targeted to specific markets
or applications, such as NewsEdge, Factset and Bloomberg
- providers of sales, marketing and credit information such as Dun &
Bradstreet
- Web retrieval, Web "portal" companies and other free or low-cost mass
market on-line services such as Excite, Infoseek, Lycos, Yahoo! and
AOL/Netscape
- free or low-cost specialized business and financial information
Websites such as Hoovers.com, Marketwatch.com, Multex.com and
TheStreet.com
Based on reported operating results, industry reports and other publicly
available information, we believe that many of our existing competitors, as well
as a number of prospective competitors, have longer operating histories, greater
name recognition, larger customer bases and significantly greater financial,
technical and marketing resources than we do. As a result, they may be able to
respond more quickly to new or emerging technologies and changes in user
requirements, or to devote greater resources to the development, promotion and
sale of their products than we can. These competitors may be able to undertake
more extensive marketing campaigns, adopt more aggressive pricing policies and
make more attractive offers to potential employees, customers and information
providers. Our competitors also may develop products that are equal or superior
to our products or that achieve greater market acceptance than our products.
IF OUR INFORMATION PROVIDERS STOPPED DOING BUSINESS WITH US, WE COULD NOT
CONTINUE TO SELL BUSINESS BROWSER. We do not own or create all of the original
content distributed through our products. We depend significantly on information
providers to supply information and data feeds to us on a timely basis. Our
products could experience interruptions due to any failure or delay in the
transmission or receipt of this information.
-28-
<PAGE> 29
IF OUR SOFTWARE IS DEFECTIVE, IT MIGHT BE COSTLY TO CORRECT; WE COULD GET
SUED AND OUR REPUTATION COULD BE HARMED. Complex software like the software we
develop for our products may contain errors or defects, especially when first
implemented, that may be very costly to correct. Defects or errors also could
result in downtime and our business could suffer significantly from potential
adverse customer reaction, negative publicity and harm to our reputation.
WE MAY HAVE DIFFICULTY IN IDENTIFYING AND COMPETING FOR ACQUISITION
OPPORTUNITIES. Our business strategy includes the pursuit of strategic
acquisitions. From time to time we may engage in discussions with third parties
concerning potential acquisitions of niche expertise, business and proprietary
rights. In executing our acquisition strategy, we may be unable to identify
suitable companies as acquisition candidates, making it more difficult to
acquire suitable companies on favorable terms.
PURSUING AND COMPLETING POTENTIAL ACQUISITIONS COULD DIVERT MANAGEMENT
ATTENTION AND FINANCIAL RESOURCES AND MAY NOT PRODUCE THE DESIRED BUSINESS
RESULTS. If we pursue any acquisition, our management could spend a significant
amount of time and management and financial resources in the acquisition process
and to integrate the acquired business with our existing business. To pay for an
acquisition, we may use capital stock, or cash or a combination of both.
Alternatively, we may borrow money from a bank or other lender. If we use cash
or debt financing, our financial liquidity will be reduced. In addition, from an
accounting perspective, an acquisition may involve nonrecurring charges or
involve amortization of significant amounts of goodwill that could adversely
affect our results of operations.
Despite the investment of these management and financial resources and
completion of due diligence with respect to these efforts, an acquisition may
not produce the revenue, earnings or business synergies that we anticipated, and
an acquired technology or proprietary right may not perform as expected for a
variety of reasons, including:
- difficulty in the assimilation of the operations, technologies,
rights, products and personnel of the acquired company
- risks of entering markets in which we have no or limited prior
experience
- expenses of any undisclosed or potential legal liabilities of the
acquired company
- the potential loss of key employees of the acquired company
WE MAY EXPERIENCE SIGNIFICANT FLUCTUATIONS IN OUR QUARTERLY RESULTS, WHICH
MAKES IT DIFFICULT FOR INVESTORS TO MAKE RELIABLE PERIOD-TO-PERIOD COMPARISONS
AND CONTRIBUTES TO VOLATILITY IN THE MARKET PRICE FOR OUR COMMON STOCK. Our
quarterly revenues, gross profits and results of operations have fluctuated
significantly in the past and we expect them to continue to fluctuate
significantly in the future. In addition, we believe that an important measure
of our business is the annualized contract value at the
-29-
<PAGE> 30
end of each period, which also may fluctuate. Causes of such fluctuations have
included and may include, among other factors:
- changes in demand for our products
- the dollar value and timing of both new and renewal subscriptions
- competition (particularly price competition)
- increases in selling and marketing expenses, as well as other
operating expenses
- technical difficulties or system downtime affecting our products on
the Web generally
- economic conditions specific to the Web, as well as general economic
conditions
- consolidation of our customers
In addition, a substantial portion of our expenses, including most product
development and selling and marketing expenses, must be incurred in advance of
revenue generation. If our projected revenue does not meet our expectations,
then we are likely to experience an even larger shortfall in our operating
profit (loss) relative to our expectations.
Any one or more of these factors could affect our business, financial
condition and results of operations, and this makes the prediction of results of
operations on a quarterly basis unreliable. As a result, we believe that
period-to-period comparisons of our historical results of operations and
annualized contract values are not necessarily meaningful and that you should
not rely on them as an indication for future performance. Also, due to these and
other factors, it is possible that our quarterly results of operations
(including the annualized contract value) may be below expectations. If this
happens, the price of our common stock would likely decrease.
ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk
OneSource is exposed to various market risks, including changes in foreign
currency exchange rates and interest rates. However, our exposure to currency
exchange rate fluctuations has been and is expected to continue to be modest due
to the fact that the operations of our United Kingdom subsidiary are almost
exclusively conducted in local currency. Operating results are translated into
United States dollars and consolidated for reporting purposes. The impact of
currency exchange rate movements on intercompany transactions was immaterial for
the years ended December 31, 1999 and 1998.
OneSource also owns financial instruments that are sensitive to market
risks as part of its investment portfolio. The investment portfolio is used to
preserve OneSource's capital until it is required to fund operations, including
the Company's marketing and product development activities. None of these
market-risk sensitive instruments are held for trading purposes. The investment
portfolio contains instruments that are subject to the risk of a decline in
interest rates. We do not enter into derivatives or any other financial
instruments for trading or speculative purposes.
-30-
<PAGE> 31
ITEM 8. Financial Statements and Supplementary Data
OneSource's Consolidated Financial Statements and Schedules and the Reports
of Independent Accountants, are set forth beginning on page F-1 of Item 14.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The information required by this Item is incorporated by reference to the
section entitled "Occupations of Directors and Executive Officers" of
OneSource's Proxy Statement for its 2000 Annual Meeting of Stockholders, which
will be filed with the Securities and Exchange Commission within 120 days after
December 31, 1999.
ITEM 11. Executive Compensation
The information required by this Item is incorporated by reference to the
section entitled "Compensation and Other Information Concerning Directors and
Executive Officers" of OneSource's Proxy Statement for its 2000 Annual Meeting
of Stockholders, which will be filed with the Securities and Exchange Commission
within 120 days after December 31, 1999.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated by reference to the
section entitled "Securities Ownership of Certain Beneficial Owners and
Management" of OneSource's Proxy Statement for its 2000 Annual Meeting of
Stockholders, which will be filed with the Securities and Exchange Commission
within 120 days after December 31, 1999.
ITEM 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by reference to the
section entitled "Certain Relationships and Related Transactions" of OneSource's
Proxy Statement for its 2000 Annual Meeting of Stockholders, which will be filed
with the Securities and Exchange Commission within 120 days after December 31,
1999.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
-31-
<PAGE> 32
(a) Documents filed as part of this report:
The following Consolidated Financial Statements and Schedules and the
Reports of the Independent Accountants are filed herein:
(1.) Financial Statements:
Index to Consolidated Financial Statements:
<TABLE>
<CAPTION> PAGE
----
<S> <C>
Report of Independent Accountants F-1
Consolidated Balance Sheets at December 31, 1999 and 1998 F-2
Consolidated Statement of Operations for the years ended December 31,
1999, 1998 and 1997 F-3
Consolidated Statement of Stockholders' Equity (Deficit) for the years
ended December 31, 1999, 1998 and 1997 F-4
Consolidated Statement of Cash Flows for the years ended December 31,
1999, 1998 and 1997 F-5
Notes to Consolidated Financial Statements F-6 to F-21
</TABLE>
(2.) Financial Statement Schedules:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants on Financial Statement Schedules S-1
Schedule II - Valuation and Qualifying Accounts S-2
</TABLE>
See Index to Exhibits. The Exhibits listed in the accompanying Index to
Exhibits are filed or incorporated by reference as part of this report. All
other financial statement schedules are omitted because they are not required,
are inapplicable or the information has been included elsewhere in the financial
statements or notes thereto.
(b) Reports on Form 8-K
A report on Form 8-K was filed on October 8, 1999. A report on Form 8-K/A
was filed on December 13, 1999. Included in these reports were the following
financial statements and pro forma financial information:
(1.) Financial Statements Of Corporate Technology Information Services, Inc.
The following financial statements required by Item 7 with respect to the
Registrant's acquisition of Corporate Technology Information Services, Inc. were
filed as part of this report:
-32-
<PAGE> 33
Report of Independent Accountants
Balance Sheets as of March 31, 1999 and September 30, 1999 (unaudited)
Statement of Operations for the year ended March 31, 1999
and for the six months ended September 30, 1998 and 1999 (unaudited)
Statement of Stockholders' Deficit for the year ended March 31, 1999
and for the six months ended September 30, 1999 (unaudited)
Statement of Cash Flows for the year ended March 31, 1999
and for the six months ended September 30, 1998 and 1999 (unaudited)
Notes to Financial Statements
(2.) Pro Forma Financial Information
The following pro forma financial information of OneSource Information
Services, Inc. required by Item 7 with respect to the Registrant's acquisition
of Corporate Technology Information Services, Inc. were filed as part of this
report:
Unaudited Pro forma Condensed Balance Sheet as of September 30, 1999
Unaudited Pro forma Condensed Statement of Operations for the year ended
December 31, 1998
Unaudited Pro forma Condensed Statement of Operations for the nine months
ended September 30, 1999
Notes to Unaudited Pro forma Condensed Financial Statements
OneSource hereby files as part of this Form 10-K the exhibits listed below.
Exhibits that are incorporated herein by reference can be inspected and copied
at the public reference rooms maintained by the Securities and Exchange
Commission in Washington, D.C., New York, New York and Chicago, Illinois. Please
call the Securities and Exchange Commission at 1-800-SEC-0330 for further
information on the public reference rooms. Securities and Exchange Commission
filings are also available to the public from commercial document retrieval
services and at the web site maintained by the SEC at HTTP://WWW.SEC.GOV.
-33-
<PAGE> 34
Exhibit No. Description
- ----------- -----------
2.01 Agreement and Plan of Merger dated September 8, 1999 by and
between the Registrant and Corporate Technology Information
Services, Inc. (filed as Exhibit 2.1 to Form 8-K dated
September 8, 1999, No. 000-25849 and incorporated herein by
reference).
2.02 Escrow Agreement dated September 8, 1999 by and among the
Registrant, Corporate Technology Information Services, Inc.,
Andrew Campbell and Citizens Bank of Massachusetts (filed as
Exhibit 2.2 to Form 8-K dated September 8, 1999, No.
000-25849 and incorporated herein by reference).
3.01 Second Amended and Restated Certificate of Incorporation of
the Registrant (filed as Exhibit 3.02 to the Registration
Statement on Form S-1, No. 333-73263 and incorporated
herein by reference).
3.02 Second Amended and Restated By-Laws of the Registrant (filed
as Exhibit 3.04 to the Registration Statement on Form S-1,
No. 333-73263 and incorporated herein by reference).
10.01* 1993 Stock Purchase and Option Plan (filed as Exhibit 10.01
to the Registration Statement on Form S-1, No. 333-73263
and incorporated herein by reference).
10.02* 1999 Stock Option and Incentive Plan (filed as Exhibit 10.02
to the Registration Statement on Form S-1, No. 333-73263
and incorporated herein by reference).
10.03* 1999 Employee Stock Purchase Plan (filed as Exhibit 10.03 to
the Registration Statement on Form S-1, No. 333-73263 and
incorporated herein by reference).
10.04 Registration Agreement dated September 8, 1993 (filed as
Exhibit 10.04 to the Registration Statement on Form S-1, No.
333-73263 and incorporated herein by reference).
10.05 Lease dated January 20, 1999 by and between the Registrant
and 300 Baker Avenue Associates, Limited Partnership (filed
as Exhibit 10.12 to the Registration Statement on Form S-1,
No. 333-73263 and incorporated herein by reference).
10.06 Agreement and Plan of Merger dated February 26, 1999 by and
between the Registrant and OneSource Holding Corporation
(filed as Exhibit 10.13 to the Registration Statement on
Form S-1, No. 333-73263 and incorporated herein by
reference).
10.07 Stock Purchase Agreement dated September 8, 1993 (filed as
Exhibit 10.08 to the Registration Statement on Form S-1, No.
333-73263 and incorporated herein by reference).
10.08 Form of Management Stock Purchase Agreement (filed as
Exhibit 10.09 to the Registration Statement on Form S-1, No.
333-73263 and incorporated herein by reference).
10.09 Stock Purchase Agreement dated August 3, 1993, by and among
Lotus Development Corporation, Datext, Inc. and Datext
Holding Corporation (filed as Exhibit 10.10 to the
Registration Statement
-34-
<PAGE> 35
on Form S-1, No. 333-73263 and incorporated herein by
reference).
10.10 Form of Fee Termination Agreement (filed as Exhibit 10.16 to
the Registration Statement on Form S-1, No. 333-73263 and
incorporate herein by reference).
10.11 Stock Redemption Agreement dated April 21, 1999 (filed as
Exhibit 10.17 to the Registration Statement on Form S-1, No.
333-73263 and incorporated herein by reference).
21.01 Subsidiaries of the Registrant
23.02 Consent of PricewaterhouseCoopers LLP
24.01 Power of Attorney (included in signature page)
27.01 Financial Data Schedule
* Indicates a management contract or compensatory plan, contract or
arrangement required to be filed as an exhibit pursuant to item 14(c).
-35-
<PAGE> 36
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
ONESOURCE INFORMATION SERVICES, INC.
Date: March 29, 2000 By: /s/ Daniel J. Schimmel
--------------------------------------
President and Chief Executive
Officer
POWER OF ATTORNEY AND SIGNATURES
The undersigned officers and directors of OneSource Information Services
Inc. hereby severally constitute and appoint Daniel J. Schimmel and Roy D.
Landon, and each of them singly, with full power of substitution, our true and
lawful attorneys-in-fact and agents to sign for us and in our names in the
capacities indicated below, any amendments to this Form 10-K, and generally to
do all things in our names and on our behalf in such capacities to enable
OneSource Information Services, Inc. to comply with the Securities Exchange Act
of 1934, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this report on Form 10-K.
<TABLE>
<CAPTION>
Signature Title(s) Date
- --------- -------- ----
<S> <C> <C>
/s/ Daniel J. Schimmel President and Chief March 29, 2000
________________________ Executive Officer
Daniel J. Schimmel (principal executive officer)
/s/ Roy D. Landon Vice President and Chief March 29, 2000
________________________ Financial Officer
Roy D. Landon (principal financial officer)
/s/ Martin Kahn Director March 29, 2000
________________________
Martin Kahn
/s/ David Dominik Director March 29, 2000
________________________
David Dominik
/s/ Gregg Newmark Director March 29, 2000
________________________
Gregg Newmark
</TABLE>
-36-
<PAGE> 37
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
OneSource Information Services, Inc.:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in stockholders' equity
(deficit) and of cash flows present fairly, in all material respects, the
financial position of OneSource Information Services, Inc. and its subsidiaries
at December 31, 1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
Boston, Massachusetts
January 28, 2000
F-1
<PAGE> 38
ONESOURCE INFORMATION SERVICES, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31,
---------------------------
1999 1998
---- ----
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ......................................... $ 13,598 $ 8,665
Accounts receivable, net of allowance for doubtful accounts of
$348 and $300 at December 31, 1999 and 1998, respectively ....... 14,420 9,621
Restricted time deposit ........................................... 100 --
Deferred subscription costs ....................................... 7,225 6,662
Prepaid expenses and other current assets ......................... 272 426
-------- --------
Total current assets ......................................... 35,615 25,374
Property and equipment, net ............................................ 3,422 1,770
Intangible assets, net ................................................. 9,606 --
Restricted time deposit ................................................ 603 100
Other assets ........................................................... 452 402
-------- --------
Total assets ................................................. $ 49,698 $ 27,646
======== ========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current portion of capital lease obligations ...................... $ 205 $ 471
Accounts payable .................................................. 1,501 995
Accrued expenses .................................................. 4,618 3,378
Accrued royalties ................................................. 5,760 4,626
Deferred revenues ................................................. 24,222 18,022
-------- --------
Total current liabilities .................................... 36,306 27,492
Capital lease obligations, net of current portion ...................... 29 233
Long-term debt ......................................................... -- 6,232
-------- --------
Total liabilities ............................................ 36,335 33,957
-------- --------
Commitments (Note 14) .................................................. -- --
Stockholders' equity (deficit):
Preferred stock, $0.01 par value:
1,000,000 shares authorized; no shares issued and outstanding
at December 31, 1999 and 1998 ................................... -- --
Class P common stock, $0.01 par value:
No shares authorized, issued or outstanding at December 31, 1999;
1,250,000 shares authorized; 717,119 shares issued and
outstanding at December 31, 1998 ................................ -- 3,524
Common stock, $0.01 par value:
20,000,000 shares authorized; 10,381,109 and 6,775,313
shares issued and 10,381,109 and 6,665,423 shares
outstanding at December 31, 1999 and 1998, respectively ......... 104 68
Additional paid-in capital ........................................ 28,504 724
Unearned compensation ............................................. (271) (39)
Accumulated deficit ............................................... (14,891) (10,444)
Accumulated other comprehensive loss .............................. (83) (138)
Common stock held in treasury, at cost ............................ -- (6)
-------- --------
Total stockholders' equity (deficit) ......................... 13,363 (6,311)
-------- --------
Total liabilities and stockholders' equity (deficit) ......... $ 49,698 $ 27,646
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 39
ONESOURCE INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Web-based product ....................................... $ 31,822 $ 16,058 $ 3,312
CD Rom product .......................................... 3,726 14,370 27,072
-------- -------- --------
35,548 30,428 30,384
-------- -------- --------
Cost of revenues:
Web-based product ....................................... 13,143 7,863 2,401
CD Rom product .......................................... 1,666 5,792 l0,444
-------- -------- --------
14,809 13,655 12,845
-------- -------- --------
Gross profit ............................................ 20,739 16,773 17,539
-------- -------- --------
Operating expenses:
Selling and marketing ................................... 13,254 11,577 9,167
Platform and product development ........................ 7,996 6,313 6,375
General and administrative .............................. 5,474 3,847 3,401
Amortization of intangible assets ....................... 376 -- --
-------- -------- --------
Total operating expenses ........................... 27,100 21,737 18,943
-------- -------- --------
Loss from operations ............................... (6,361) (4,964) (1,404)
Interest expense ............................................. (663) (878) (943)
Interest income .............................................. 710 283 13
Gain on sale of product line ................................. -- 12,797 501
Other income ................................................. 2,000 -- --
-------- -------- --------
Income (loss) before provision for income taxes..... (4,314) 7,238 (1,833)
Provision for income taxes ................................... 133 250 --
-------- -------- --------
Net income (loss) .................................. (4,447) 6,988 (1,833)
Less: income attributable to Class P common stock ............ -- 1,367 414
-------- -------- --------
Net income (loss) attributable to common stock ..... $ (4,447) $ 5,621 $ (2,247)
======== ======== ========
Class P common stock:
Basic and diluted earnings per share .................... -- $ 1.91 $ 0.57
Weighted average Class P common shares outstanding ...... -- 718 718
Common stock:
Basic eamings (loss) per share .......................... $ (0.50) $ 0.85 $ (0.34)
Diluted earnings (loss) per share ....................... $ (0.50) $ 0.59 $ (0.34)
Weighted average common shares outstanding:
Basic .............................................. 8,822 6,641 6,545
Diluted ............................................ 8,822 9,563 6,545
Pro forma loss per share:
Basic and diluted ....................................... $ (0.48)
Weighted average common shares outstanding:
Basic and diluted .................................. 9,200
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 40
ONESOURCE INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands, except share data)
<TABLE>
<CAPTION>
Class P
common stock Common stock Additional
------------ ------------ paid-in Unearned
Shares Amount Shares Amount capital compensation
------ ------ ------ ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 717,948 $ 3,528 6,594,572 $ 66 $ 346 $ --
Comprehensive loss:
Net loss .....................................
Foreign currency translation adjustment ......
Comprehensive loss .......................
Issuance of common stock pursuant to
exercise of options .......................... 90,387 1 16
-------- ------- ---------- ---- ------ -----------
Balance, December 31, 1997 ................... 717,948 3,528 6,684,959 67 362 --
Comprehensive loss:
Net income ...................................
Foreign currency translation adjustment ......
Comprehensive loss .......................
Issuance of common stock pursuant to
exercise of options .......................... 90,354 1 22
Unearned compensation relating to
grants of stock options ...................... 45 (45)
Amortization of unearned compensation
relating to grants of stock options .......... 6
Compensation relating to modification of
stock options on sale of product line ........ 295
Reacquisition and retirement of Class P
common stock ................................. (829) (4)
Reacquisition of common stock for
treasury .....................................
-------- ------ ---------- ---- ------ -----------
Balance, December 31, 1998 ................... 717,119 3,524 6,775,313 68 724 (39)
Comprehensive loss:
Net loss .....................................
Foreign currency translation adjustment ......
Comprehensive loss .......................
Conversion of Class P common stock and
the preference amount to common stock ........ (717,119) (3,524) 999,328 10 3,514
Repurchase and retirement of common
stock ........................................ (282,209) (3) (3,384)
Retirement of treasury stock ................. (109,890) (1) (5)
Issuance of common stock pursuant to
initial public offering, net of offering costs 2,500,000 25 26,890
Unearned compensation relating to
grants of stock options ...................... 346 (346)
Amortization of unearned compensation
relating to grants of stock options .......... 114
Issuance of common stock pursuant to
exercise of options .......................... 415,538 4 415
Issuance of common stock pursuant to
exercise of warrants ......................... 83,029 1 4
------- ------- ---------- ---- ------- -----------
Balance, December 31, 1999 -- $ -- 10,381,109 $104 $28,504 $ (271)
======= ======= ========== ==== ======= ===========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
other Treasury stock Total
Accumulated comprehensive -------------- stockholders' Comprehensive
deficit loss Shares Amount equity (deficit) income (loss)
----------- ---------- ------ ------ ---------------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ (15,599) $ (162) 102,564 $ (6) $ (11,827)
Comprehensive loss:
Net loss ..................................... (1,833) (1,833) $(1,833)
Foreign currency translation adjustment ...... 30 30 30
Comprehensive loss ....................... -------
Issuance of common stock pursuant to (1,803)
exercise of options .......................... 17 =======
---------- -------- --------- ----- --------
Balance, December 31, 1997 ................... (17,432) (132) 102,564 (6) (13,613)
Comprehensive loss:
Net income ................................... 6,988 6,988 6,988
Foreign currency translation adjustment ...... (6) (6) (6)
Comprehensive loss ....................... -------
6,982
Issuance of common stock pursuant to =======
exercise of options .......................... 23
Unearned compensation relating to
grants of stock options ...................... --
Amortization of unearned compensation
relating to grants of stock options .......... 6
Compensation relating to modification of
stock options on sale of product line ........ 295
Reacquisition and retirement of Class P
common stock ................................. (4)
Reacquisition of common stock for
treasury ..................................... 7,326 -- --
---------- -------- --------- ----- --------
Balance, December 31, 1998 ................... (10,444) (138) 109,890 (6) (6,311)
Comprehensive loss:
Net loss ..................................... (4,447) (4,447) (4,447)
Foreign currency translation adjustment ...... 55 55 55
Comprehensive loss ....................... -------
(4,392)
Conversion of Class P common stock and =======
the preference amount to common stock ........ --
Repurchase and retirement of common
stock ........................................ (3,387)
Retirement of treasury stock ................. (109,890) 6 --
Issuance of common stock pursuant to
initial public offering, net of offering costs 26,915
Unearned compensation relating to
grants of stock options ...................... --
Amortization of unearned compensation
relating to grants of stock options .......... 114
Issuance of common stock pursuant to
exercise of options .......................... 419
Issuance of common stock pursuant to
exercise of warrants ......................... 5
---------- ------- --------- ----- --------
Balance, December 31, 1999 $ (14,891) $ (83) -- $ -- $ 13,363
=========== ======= ========= ===== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 41
ONESOURCE INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows relating to operating activities:
Net income (loss) ................................................... $ (4,447) $ 6,988 $ (1,833)
Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities:
Depreciation and amortization ..................................... 1,661 1,518 1,776
Amortization of intangible assets ................................. 376 -- --
Amortization of unearned compensation relating to
grants of stock options ........................................... 114 6 --
Amortization of debt discount ..................................... 52 121 142
Loss on sale leaseback transaction ................................ -- 45 --
Gain on sale of product line ...................................... -- (12,797) (501)
Changes in assets and liabilities, net of effects of acquisition
of Corporate Technology:
Accounts receivable ............................................. (4,294) (946) 17
Deferred subscription costs ..................................... (563) (2,217) (748)
Prepaid expenses and other assets ............................... (266) (43) 14
Accounts payable ................................................ 523 (213) (459)
Accrued expenses ................................................ 528 1,075 758
Accrued royalties ............................................... 1,134 2,283 (128)
Deferred revenues ............................................... 4,580 5,373 453
-------- -------- --------
Net cash provided (used) by operating activities .................. (602) 1,193 (509)
-------- -------- --------
Cash flows relating to investing activities:
Investment in restricted time deposits .............................. (603) (100) --
Purchases of property and equipment ................................. (2,759) (1,252) (878)
Capitalization of software development costs ........................ (225) (200) (75)
Net proceeds from sale of product line .............................. -- 10,563 501
Acquisition of Corporate Technology, net of cash acquired ........... (7,560) -- --
-------- -------- --------
Net cash provided (used) by investing activities ................. (11,147) 9,011 (452)
-------- -------- --------
Cash flows relating to financing activities:
Proceeds from issuance of common stock, net ......................... 27,339 23 17
Repurchase of Class P common stock and common stock ................. (3,387) (4) --
Net borrowings (repayments) under line of credit .................... -- (1,183) 883
Repayments of term loan ............................................. -- (347) (228)
Repayment of long-term debt ......................................... (6,722) -- --
Proceeds from sale and leaseback of fixed assets .................... -- 228 753
Repayments of capital lease obligations ............................. (549) (684) (607)
-------- -------- --------
Net cash provided (used) by financing activities ................. 16,681 (1,967) 818
-------- -------- --------
Effect of exchange rate changes on cash and cash equivalents .......... 1 87 (51)
-------- -------- --------
Increase (decrease) in cash and cash equivalents ...................... 4,933 8,324 (194)
Cash and cash equivalents, beginning of year .......................... 8,665 341 535
-------- -------- --------
Cash and cash equivalents, end of year ................................ $ 13,598 $ 8,665 $ 341
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 42
ONESOURCE INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
OneSource Information Services, Inc. and its wholly-owned subsidiaries
provide Web-based business and financial information to professionals in
corporations and other enterprises and publishes information on private
technology companies. OneSource primarily sells its products through a direct
sales force located throughout the United States and United Kingdom. OneSource
manages its business as a single segment.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of OneSource
Information Services, Inc. and its wholly-owned subsidiaries: Corporate
Technology Information Services, Inc. and OneSource Information Services
Limited, (collectively, "OneSource"). All significant intercompany transactions
and balances have been eliminated.
REVENUE RECOGNITION
OneSource's products are sold on a subscription basis pursuant to customer
contracts that span varying periods of time but are generally for a period of
one year. In accordance with its customer agreements, OneSource initially
records receivables and defers the related revenue at the time amounts are
billed to customers. Revenues are recognized ratably over the related
subscription period.
OneSource also produces print directories on an annual basis. The related
revenue is recognized upon shipment, provided that fees are fixed or
determinable and collection of the related receivable is probable.
SUBSCRIPTION COSTS
Subscription costs represent sales commission and royalty costs that are
directly associated with securing a subscription and procuring information to be
delivered over the subscription period, respectively. These costs are deferred
and amortized ratably over the associated subscription period as a component of
selling and marketing expense and cost of revenues, respectively. At December
31, 1999 and 1998, deferred subscription costs consisted of $1.7 million and
$1.3 million, respectively, related to sales commissions and $5.5 million and
$5.4 million, respectively, related to royalties.
F-6
<PAGE> 43
CASH AND CASH EQUIVALENTS
Cash equivalents consist of money market funds with original maturities of
three months or less and are stated at cost which approximates fair market
value. These funds are managed by a financial institution with a strong credit
rating. Accordingly, the investments are subject to minimal credit and market
risks.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated over their
estimated useful lives, generally three to five years, using the straight-line
method. Equipment held under capital leases is stated at the fair value of the
equipment at inception of the leases and is amortized on a straight-line basis
over the term of the leases.
INTANGIBLE ASSETS
Intangible assets consist primarily of a trademark, non-compete agreement,
subscriber list, database and goodwill. Intangible assets are amortized using
the straight-line method over a period of three to seven years, based on the
estimated useful life. The carrying value of the intangible assets is reviewed
on a quarterly basis for the existence of facts or circumstances both internally
and externally that may suggest impairment. To date, no such impairment has
occurred. OneSource determines whether an impairment has occurred based on gross
expected future cash flows and measures the amount of the impairment based on
the related future estimated discounted cash flows. The cash flow estimates used
to determine the impairment, if any, contain management's best estimates, using
appropriate and customary assumptions and projections at the time.
PLATFORM AND PRODUCT DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS
Platform and product development costs, other than certain software
development costs, are charged to expense as incurred. Software development
costs incurred subsequent to the establishment of technological feasibility (as
defined by Statement of Financial Accounting Standards ("SFAS") No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed"), and prior to general release of the product, are capitalized and
amortized on a straight-line basis over the estimated useful lives of the
related products, generally twenty-four to thirty-six months. The Company also
adopted in 1999 Statement of Position ("SOP") 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which requires
computer software costs associated with internal use to be charged to operations
as incurred until certain capitalization criteria are met. At December 31, 1999
and 1998, OneSource had capitalized software development costs pursuant to the
above of $306,000 and $310,000, respectively. For the years ended December 31,
1999, 1998 and 1997, amortization of capitalized software development costs
amounted to $229,000, $198,000 and $413,000, respectively.
FINANCIAL INSTRUMENTS
F-7
<PAGE> 44
Fair values of OneSource's financial instruments, which include cash and
cash equivalents, restricted time deposits, accounts receivable, long-term debt
and capital lease obligations are based on quoted market prices and assumptions
concerning the amount and timing of estimated future cash flows and assumed
discount rates reflecting varying degrees of perceived risk. The carrying value
of these financial instruments approximated their fair value at December 31,
1999 and 1998.
CONCENTRATION OF CREDIT RISK
Concentration of credit risk with respect to accounts receivable is limited
due to the large number of companies comprising OneSource's client base. Ongoing
credit evaluations of customers' financial condition are performed and
collateral is generally not required. OneSource maintains reserves for potential
credit losses and such losses, in the aggregate, have not exceeded management's
expectations.
ACCOUNTING FOR STOCK-BASED COMPENSATION
OneSource accounts for stock-based compensation to employees in accordance
with Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock
Issued to Employees," and related interpretation. Accordingly, compensation
expense is recorded for options issued to employees in fixed amounts to the
extent that the fixed exercise prices are less than the fair market value of
OneSource's common stock at the date of grant. OneSource follows the disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation" (Note
9). All stock-based awards to non-employees are accounted for at their fair
value in accordance with SFAS No. 123.
EARNINGS PER SHARE AND PRO FORMA EARNINGS PER SHARE
Earnings per share is computed in accordance with SFAS No. 128, "Earnings
Per Share." SFAS No. 128 requires the presentation of two amounts, basic
earnings per share and diluted earnings per share. The two-class method of
computing earnings per share has been used since the Class P common stock and
the common stock share ratably in earnings remaining subsequent to the 12% yield
on the Class P common stock.
Earnings per share of Class P common stock is calculated by dividing the
yield earned and income (loss) attributable to Class P common stock by the
weighted average number of shares of Class P common stock outstanding during the
period. Diluted earnings per share is the same for all periods presented as
there are no securities outstanding that would result in dilution for Class P
common stock.
Earnings per share of common stock is calculated by dividing income (loss)
attributable to common stock by the weighted average number of shares of common
stock outstanding during the period. Diluted earnings per share is calculated by
considering the impact of potential common stock as if they were converted into
common stock at the beginning of the period. Potential common stock equivalents
are not included in loss periods as they are anti-dilutive.
F-8
<PAGE> 45
Pro forma basic and diluted earnings per share of common stock for the year
ended December 31, 1999 has been calculated based on net income applicable to
all classes of common stock and assuming the reclassification of OneSource's
Class P common stock prior to the completion of OneSource's public offering, as
if such reclassification had occurred at January 1, 1999 for the year ended
December 31, 1999. Each share of Class P common stock was reclassified into one
share of common stock plus an additional number of shares of common stock
(determined by dividing the preference amount for such share by the initial
public offering price of $12.00 per share).
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of OneSource's United Kingdom operations, where the
local currency is the functional currency, are translated into US dollars at the
exchange rate in effect as of the balance sheet date, while revenues and
expenses are translated at average exchange rates during the period. The
resultant translation adjustment is reflected as a separate component of
stockholders' equity (deficit). Transaction gains and losses, which are not
material in amount, are reflected in the consolidated statement of operations.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires OneSource management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." The new
standard establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives), and for hedging activities.
SFAS No.133 requires companies to recognize all derivatives as either assets or
liabilities, with the instruments measured at fair value. The accounting for
changes in fair value, gains or losses, depends on the intended use of the
derivative and its resulting designation. In June 1999, the FASB issued SFAS No.
137 that defers the effective date of adoption of SFAS No. 133 to fiscal years
beginning after June 15, 2000. Management believes the effect of adoption SFAS
No. 133 will not have a significant impact on its financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB No. 101"), "Revenue Recognition in Financial
Statements." SAB No. 101 provides guidance on applying generally accepted
accounting principles to revenue recognition issues in financial statements.
OneSource will adopt SAB No. 101 as
F-9
<PAGE> 46
required in the first quarter of 2000 and is evaluating the effect that such
adoption may have on its consolidated results of operations and financial
position.
3. ACQUISITION
On October 1, 1999, OneSource acquired Corporate Technology Information
Services, Inc. ("Corporate Technology"), a Delaware corporation located in
Woburn, Massachusetts (the "Acquisition"). Corporate Technology is a provider of
high technology company profiles with a focus on emerging private companies.
Pursuant to the terms of an Agreement and Plan of Merger, the consideration paid
by OneSource was $7.6 million in cash. A portion of the cash consideration is
being held in escrow to be released in accordance with the Agreement and Plan of
Merger and an Escrow Agreement. The Corporate Technology acquisition has been
accounted for under the purchase method of accounting. Accordingly, the purchase
price was allocated based upon an independent professional appraisal of the fair
value of assets acquired and liabilities assumed. The excess of the purchase
price over the fair value of the tangible assets acquired of $1.0 million and
liabilities assumed of $2.5 million totaled $9,982,000. This amount has been
included in intangible assets (Note 4), which are being amortized using the
straight-line method over applicable periods ranging from three to seven years;
related amortization expense totaled $376,000 for the year ended December 31,
1999. The operating results of Corporate Technology have been included in the
financial statements since the date of the Acquisition. The following unaudited
pro forma condensed financial information presents the combined results of
operations of OneSource and Corporate Technology, including the amortization of
intangible assets, as if the Acquisition had occurred at the beginning of each
year presented:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Pro forma revenues .................................................. $ 39,532 $ 35,103
Pro forma cost of revenues .......................................... 15,181 14,227
-------- --------
Pro forma gross profit .............................................. $ 24,351 $ 20,876
======== ========
Pro forma net income (loss) attributable to common stock............. $ (6,022) $ 3,560
======== ========
Pro forma eamings (loss) per share of common stock:
Basic eamings (loss) per share ................................. $ (0.68) $ 0.54
Diluted earnings (loss) per share .............................. $ (0.68) $ 0.37
Weighted average common shares outstanding:
Basic ..................................................... 8,822 6,641
Diluted ................................................... 8,822 9,563
</TABLE>
F-10
<PAGE> 47
The pro forma results of operations are not necessarily indicative of the
results that would have occurred had the Acquisition occurred at the beginning
of each year presented, and are not intended to be indicative of future results
of operations.
4. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
December 31,
1999
------------
(in thousands)
<S> <C>
Trademark ....................................... $ 145
Non-compete agreement ........................... 400
Subscriber list ................................. 1,150
Database ........................................ 986
Goodwill ........................................ 7,301
-------
9,982
Less: accumulated amortization................... (376)
-------
$ 9,606
=======
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Office and computer equipment .............. $ 6,101 $ 5,478
Furniture and fixtures ..................... 273 326
------- -------
6,374 5,804
Less: accumulated depreciation and
amortization ............................. (2,952) (4,034)
------- -------
$ 3,422 $ 1,770
======= =======
</TABLE>
At December 31, 1999 and 1998, office and computer equipment under capital
leases totaled $837,000 and $1,304,000, respectively. Related accumulated
amortization of assets under capital leases totaled $651,000 and $702,000 at
December 31, 1999 and 1998, respectively. During the years ended December 31,
1998 and 1997, OneSource sold and leased back certain computer equipment with
net book values of $237,000, and $788,000, respectively, for cash proceeds of
$228,000 and $753,000. During 1999 and 1998, OneSource retired $3,124,000 and
$525,000, respectively, of fully depreciated property and equipment.
6. BORROWINGS
F-11
<PAGE> 48
NOTES PAYABLE
OneSource entered into a credit agreement (the "Agreement") with a bank, as
amended, which provided for a line of credit (the "Line") of up to $2.5 million
through April 1, 1998 and a term loan (the "Term Loan") of $750,000 to be used
for financing equipment purchases. During 1998, the Line and the Term Loan
expired and were repaid in full.
LONG-TERM DEBT
In connection with the acquisition of the business in 1993, OneSource
entered into a subordinated note agreement with the seller with a face amount of
$5.0 million (the "Note"). The Note accrued interest at 8% per annum, payable
annually commencing March 31, 1995 and was discounted to reflect the market rate
of 12% at the time of issuance. The initial discount totaling $938,000 was being
amortized to interest expense over the life of the Note using the effective
interest method. Interest payments were added to the unpaid principal of the
Note annually if OneSource's cash flow, as defined in the Note agreement, was
less than a specified amount.
As of December 31, 1998, the carrying value of the Note was $6,232,000. In
accordance with the terms of the Note agreement, OneSource added $1,523,000 to
the principal of the Note for interest which accrued through the end of December
31, 1997. As of December 31, 1998, the unamortized discount was $291,000.
Accrued interest related to the Note was $524,000 for the year ended December
31, 1998 and, since OneSource met the cash flow requirements set forth in the
Note agreement, such amount was paid in March 1999.
Upon the completion of the Company's public offering and in accordance with
the Note agreement, OneSource repaid the Note in May 1999 for $6.8 million of
principal and interest. In conjunction with the repayment, OneSource recognized
$272,000 of interest expense, which represented the remaining unamortized
discount on the Note.
7. EARNINGS PER SHARE
The following tables set forth the computation of earnings per share of
common stock and Class P common stock from net income (loss):
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------
1999 1998 1997
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Numerator for common stock:
Net income (loss) ............... $(4,447) $ 6,988 $(1,833)
Less: income attributable
to Class P common stock ...... -- 1,367 414
------- ------- -------
</TABLE>
F-12
<PAGE> 49
<TABLE>
<CAPTION>
<S> <C> <C> <C>
$(4,447) $ 5,621 $(2,247)
======= ======= =======
Denominator for common
stock:
Weighted average shares
outstanding used for
basic earnings per
share ........................ 8,822 6,641 6,545
Effect of dilutive
securities:
Stock options ................... -- 2,433 --
Common stock warrants ........... -- 489 --
------- ------- -------
Weighted average shares
outstanding used for
diluted earnings per
share ........................ 8,822 9,563 6,545
======= ======= =======
Numerator for Class P common stock:
Yield earned by Class P
common stock ................. $ -- $ 742 $ 660
Income (loss) attributable
to Class P common stock ...... -- 625 (246)
------- ------- -------
$ -- $ 1,367 $ 414
======= ======= =======
</TABLE>
At December 31, 1999, total potential common equivalent shares consist of
3,675,794 stock options outstanding with a weighted average exercise price of
$2.72 per share and 407,000 common stock warrants exercisable at $0.06 per
share. At December 31, 1997, total potential common equivalent shares consist of
3,606,524 stock options outstanding with a weighted average exercise price of
$1.35 per share and 490,029 common stock warrants exercisable at $0.06 per
share.
Basic and diluted earnings per share of Class P common stock are the same
for all periods presented since there are no potentially dilutive securities.
8. STOCKHOLDERS' EQUITY
In connection with its initial capitalization, OneSource issued 725,274
shares of Class P common stock and 6,527,466 shares of common stock at $4.91 per
share and $0.06 per share, respectively. The holders of the Class P common
stock, as a separate class, were entitled to receive first all or a portion of
any distribution, as defined, until the "preference amount" and the original
issuance cost had been paid in full. The preference amount was 12% compounded
quarterly. After all such payments were made, the holders of the Class P common
stock and of the common stock were entitled to share pro rata in the remaining
portion of the distribution, as a single class. No dividends on either the Class
P common stock or the common stock have been declared or paid, and no payments
of the aggregate yield have been made to the Class P common stockholders. As a
result, the Class P common stock was stated at its original issuance cost of
$4.91 per share. On May 24,1999, the liquidation preference of these shares was
$6,911,000, consisting of its original issuance cost of $3,524,000 and
accumulated "preference amount" of $3,387,000.
Authorized Shares
The authorized capital stock of the Company consists of 20,000,000 shares
of common stock, $0.01 par value, and 1,000,000 shares of undesignated preferred
stock,
F-13
<PAGE> 50
$0.01 par value. Prior to the closing of OneSource's public offering,
OneSource's capital stock consisted of 20,000,000 shares of common stock, $0.01
par value, and 1,250,000 shares of Class P common stock, $0.01 par value.
Voting Rights
All holders of common stock are entitled to one vote per share on all
matters to be voted upon by OneSource's stockholders.
Stock Split
On April 13, 1999, OneSource authorized a 2.035 for one stock split on
common stock and Class P common stock. As a result, all common stock and Class P
common stock share data included in the accompanying consolidated financial
statements and notes have been retroactively restated for this split.
Warrants
In connection with the Note agreement (Note 6), OneSource issued a warrant
exercisable at $0.06 per share for 407,000 shares of OneSource's common stock.
This warrant was fully exercised in January 2000.
Public Offering
In May 1999, OneSource completed an initial public offering of 3,636,000
shares of its common stock, of which 2,500,000 shares were issued and sold by
OneSource, for net proceeds of $27.0 million. As a result, all outstanding
shares of Class P common stock were automatically converted into 717,119 shares
of OneSource's common stock.
In conjunction with the initial public offering, OneSource converted the
accumulated "preference amount" on Class P common stock of $3,387,000 into
282,209 shares of common stock based on the public offering price of $12.00 per
share. Subsequently, OneSource repurchased and retired the equivalent number of
common stock shares issued for the preference amount at $12.00 per share.
Reserved Shares
At December 31, 1999, OneSource had reserved 4,655,015 shares of common
stock for issuance upon exercise of common stock options and warrants.
9. STOCK PLANS
The 1993 Stock Purchase and Option Plan (the "1993 Plan") provides for the
grant of incentive stock options and non-qualified stock options for the
purchase of up to an aggregate of 4,273,500 shares of OneSource's common stock
by employees, directors,
F-14
<PAGE> 51
consultants and advisors of OneSource. The Board of Directors determines the
term of each option, option price, number of shares for which each option is
granted, whether restrictions will be imposed on the shares subject to options,
and the vesting schedule of each option. The exercise price for incentive stock
options granted may not be less than the fair value per share of the underlying
common stock on the date granted as determined by the Board of Directors (not
less than 110% of the fair value for options granted to holders of more than 10%
of the voting stock of OneSource). Additionally, the term of the options cannot
exceed ten years (five years for options granted to holders of more than 10% of
the voting stock of OneSource). The options generally vest over a four-year
period. In February 1999, there were no shares of common stock available for
grant under the 1993 Plan.
In February 1999, the Board of Directors of OneSource approved the 1999
Stock Option and Incentive Plan (the "1999 Plan") to be effective upon
OneSource's initial public offering. The 1999 Plan provides for the grant of
stock-based awards to employees, officers and directors of, and consultants or
advisors to, OneSource. A total of 800,000 shares of common stock are authorized
for issuance upon the exercise of options or other awards granted under the 1999
Plan.
In February 1999, the Board of Directors of OneSource approved the 1999
Employee Stock Purchase Plan (the "1999 Purchase Plan"), to be effective upon
OneSource's initial public offering. The 1999 Purchase Plan provides for the
issuance of a maximum of 100,000 shares of common stock.
Transactions under the 1993 Plan and 1999 Plan during the years ended
December 31, 1997, 1998 and 1999 are summarized as follows:
<TABLE>
<CAPTION>
Weighted-
Number of average
shares exercise price
--------- --------------
<S> <C> <C>
Outstanding--December 31, 1996 .......... 3,871,799 $ 1.31
Granted (weighted average fair value of
$0.12) ............................. 294,261 1.73
Exercised ............................. (90,387) 0.19
Forfeited ............................. (469,149) 1.47
---------
Outstanding--December 31, 1997 .......... 3,606,524 1.35
Granted (weighted average fair value of
$1.13) ............................. 204,925 2.18
Exercised ............................. (90,354) 0.27
Forfeited ............................. (173,179) 1.34
---------
Outstanding--December 31, 1998 .......... 3,547,916 1.43
Granted (weighted average fair value of
$3.81) ............................. 641,613 9.19
Exercised ............................. (415,538) 0.99
Forfeited ............................. (98,197) 5.44
---------
Outstanding--December 31, 1999 .......... 3,675,794 2.72
=========
</TABLE>
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1999:
F-15
<PAGE> 52
<TABLE>
<CAPTION>
Weighted-
average
remaining
Number contractual Number
Exercise price outstanding life in years exercisable
- -------------- ----------- ------------- -----------
<S> <C> <C> <C>
$ 0.12 .................... 562,450 3.8 562,450
1.37 .................... 1,229,483 5.5 1,047,621
2.19 .................... 1,349,509 5.8 1,083,473
9.93 .................... 306,573 9.5 39,454
7.13 to 8.38 ............ 128,100 9.8 --
12.00 to 12.13 ........... 99,679 9.8 --
--------- ---------
3,675,794 6.0 2,732,998
========= =========
</TABLE>
As of December 31, 1998 and 1997, 2,730,457 and 2,472,240 options were
exercisable, respectively, under the 1993 Plan. As of December 31, 1999, there
were 572,221 shares of common stock available for grant under the 1999 Plan.
Fair Value
Compensation expense has been recognized for OneSource's stock option plans
under APB No. 25. Had compensation cost been determined based on the fair value
of the options at the grant date consistent with the provisions of SFAS No. 123,
OneSource's net income (loss) and earnings (loss) per share on a pro forma basis
would be as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net income (loss) (in thousands):
As reported ............................... $ (4,447) $ 6,988 $ (1,833)
Pro forma ................................. (4,779) 6,909 (1,890)
Basic and diluted earnings per Class P common
share:
As reported ............................... -- 1.91 0.57
Pro forma ................................. -- 1.89 0.57
Basic earnings per common share:
As reported ............................... (0.50) 0.85 (0.34)
Pro forma ................................. (0.54) 0.84 (0.35)
Diluted earnings per common share:
As reported ............................... (0.50) 0.59 (0.34)
Pro forma ................................. (0.54) 0.58 (0.35)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions:
F-16
<PAGE> 53
<TABLE>
<CAPTION>
Year ended
December 31,
------------------------
1999 1998
---- ----
<S> <C> <C>
Expected option term (years) ............................ 5.0 5.0
Risk-free interest rate (%) .............................. 5.60 5.58
Expected volatility (%) .................................. 18.78 --
Dividend yield (%) ....................................... -- --
Weighted-average fair value of options granted............ $ 3.81 $ 1.13
</TABLE>
Because options vest over several years and additional option grants are
expected to be made in future years, results of operations for future years may
be materially different if the provisions of SFAS No. 123 are applied.
Compensation Expense
In conjunction with the sale of the CD-Insurance division, OneSource
modified the terms of 226,601 stock options held by terminated employees. In
accordance with APB No. 25, compensation expense of $295,000 was recorded as a
reduction of the gain on the sale of the insurance division in the year ended
December 31, 1998.
During 1998, 203,093 stock options were granted with an exercise price of
$2.19 per share and 1,832 stock options were granted with an exercise price of
$1.37 per share; these exercise prices were below the estimated fair market
value of the common stock at the date of grant. Unearned compensation of $45,000
was recorded, in accordance with APB No. 25, and will be amortized over the
related vesting period. Options issued during 1997 were granted with exercise
prices above the estimated fair market value of the common stock at the date of
grant.
During 1999, 40,700 stock options were granted with an exercise price of
$2.19 per share and 30,525 stock options were granted with an exercise price of
$5.90 per share; these exercise prices were below the estimated fair market
value of the common stock at the date of grant. Unearned compensation of
$438,000, less $92,000 subsequently forfeited by a terminated employee, was
recorded in accordance with APB No. 25 and will be amortized over the related
vesting period of four years. Related compensation expense of $114,000 and
$6,000 was recorded during the years ended December 31, 1999 and 1998,
respectively.
10. INCOME TAXES
Components of the income (loss) before income taxes and of the current
provision for income taxes are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------
1999 1998 1997
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Income (loss) before income taxes:
Domestic........................ $ (3,832) $7,204 $ (2,124)
Foreign......................... (482) 34 291
-------- ------ --------
</TABLE>
F-17
<PAGE> 54
<TABLE>
<CAPTION>
<S> <C> <C> <C>
$ (4,314) $7,238 $ (1,833)
======== ====== ========
Current provision for income taxes:
Federal......................... $ -- $ 200 $ --
State........................... 133 45 --
Foreign......................... -- 5 --
------ ------ --------
$ 133 $ 250 $ --
====== ====== ========
</TABLE>
OneSource had no deferred provision for income taxes in each of the years
ended December 31, 1999, 1998 and 1997 due to the offsetting effects of the
valuation allowance on its net deferred tax assets. Provision has not been made
for the United States or additional foreign taxes on undistributed earnings of
foreign subsidiaries as those earnings have been permanently reinvested. Such
taxes, if any, are not expected to be significant.
Income taxes computed using the federal statutory income tax rate differ
from OneSource's effective tax rate primarily due to the following:
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------
1999 1998 1997
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Income tax expense (benefit) at US federal
statutory tax rate ..................... $(1,467) $ 2,461 $ (623)
State income taxes, net of federal tax
effect ................................. (156) 508 (125)
Permanent items .......................... 128 21 20
Other .................................... 36 36 (4)
Change in deferred tax asset valuation
allowance .............................. 1,592 (2,776) 732
------- ------- -------
Provision for income taxes ............... $ 133 $ 250 $ --
======= ======= =======
</TABLE>
Components of OneSource's deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
December 31,
-------------------------
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards ................. $ 3,138 $ 238
Depreciation ..................................... 618 537
Accrued expenses ................................. 466 623
Deferred revenues ................................ 1,851 1,342
Equity compensation .............................. -- 123
Miscellaneous .................................... 182 133
------- -------
Gross deferred tax asset ...................... 6,255 2,996
Less: valuation allowance ........................ (3,858) (1,768)
------- -------
Total deferred tax assets ..................... 2,397 1,228
------- -------
Deferred tax liabilities:
Prepaid expenses ................................. 684 513
Deferred royalties ............................... 117 252
Intangible assets ................................ 1,052 --
Amortization of debt discount .................... 72 217
Capitalized software development costs............ 126 127
Tax operating leases ............................. 346 119
------- -------
Total deferred tax liabilities ................ 2,397 1,228
------- -------
Net deferred tax assets ............................ $ -- $ --
======= =======
</TABLE>
A portion of the net operating loss carryforwards totaling approximately
$1.0 million relates to deductions for the exercise of non-qualified stock
options and will be credited to additional paid-in capital upon realization.
Approximately $533,000 of the valuation allowance at December 31, 1999 relates
to deferred tax assets acquired from Corporate Technology.
Realization of OneSource's net deferred tax assets is contingent upon the
generation of
F-18
<PAGE> 55
future taxable income. Due to the uncertainty of realization of these tax
benefits, OneSource has provided a valuation allowance for the full amount of
its net deferred tax assets.
As of December 31, 1999, OneSource has federal and state net operating loss
carryforwards of approximately $7.5 million that begin to expire in 2019 and
2004, respectively. During 1998, OneSource utilized $8.0 million of net
operating loss carryforwards. As of December 31, 1998, OneSource had net
operating loss carryforwards of $575,000 for foreign tax purposes which do not
expire. Under the provisions of the Internal Revenue Code, if certain
substantial changes in OneSource's ownership should occur, the amount of net
operating loss carryforwards which could be utilized annually to offset future
taxable income and income tax liability may be limited. The amount of any annual
limitation is determined based upon OneSource's value prior to an ownership
change.
11. SALE OF PRODUCT LINES
In June 1997, OneSource sold its CD Rom banking product line for $650,000
in cash. In connection with the sale, OneSource entered a non-compete agreement
for five years. As a result of the sale, OneSource recorded a gain of $501,000
which is net of expenses of $149,000 incurred in conjunction with the sale. No
assets or liabilities with recorded net book values were transferred in
connection with this product line sale.
In May 1998, OneSource sold its CD-Insurance division for $11.0 million in
cash and entered a software license agreement for $4.0 million to be received in
equal quarterly installments for two years commencing January 1, 1999. In
connection with the sale, OneSource also entered a non-compete agreement for
five years. As a result of the sale, OneSource recorded a gain of $12,797,000
which includes: (i) the recognition of $3,124,000 of deferred revenues and
$595,000 of deferred subscription costs based upon the assumption by the buyer
of all obligations to service the existing subscriber base of the insurance
division, (ii) $530,000 of employee severance costs and (iii) $202,000 of
expenses associated with the sale. Payments pertaining to the software license
agreement will be recognized in other income as support services are performed
and payments become due in accordance with the agreement. During 1999, OneSource
recorded $2.0 million of other income related to the software license agreement.
12. EMPLOYEE BENEFIT PLANS
After three months of service, OneSource employees are eligible to
participate in a tax deferred savings plan (the "Savings Plan") under Section
401(k) of the Internal Revenue Code. OneSource matches 25% of the first 6%
contributed by the employee, and the employee becomes fully vested in
OneSource's matching contribution after three years of service. OneSource's
contributions to the Savings Plan totaled $133,000, $120,000 and $116,000 for
the years ended December 31, 1999, 1998 and 1997, respectively.
13. RELATED PARTY TRANSACTIONS
F-19
<PAGE> 56
At December 31, 1999 and 1998, OneSource had accounts receivable of
$373,000 and $335,000, respectively, due from two stockholders. OneSource
recognized revenue of $558,000, $318,000 and $292,000 in the years ended
December 31, 1999, 1998 and 1997, respectively, from these parties.
Management fees paid to a stockholder and an affiliate of another
stockholder for the years ended December 31, 1999, 1998 and 1997 were $68,000,
$200,000 and $200,000, respectively, and are included in general and
administrative expenses.
In addition, OneSource paid a termination fee of $500,000 to both a
shareholder and an affiliate of another shareholder in conjunction with the
initial public offering.
14. COMMITMENTS
Leases
OneSource leases facilities and certain equipment under various
noncancellable operating lease agreements. Total rent expense under such leases
was $1.6 million, $1.1 million and $1.2 million for the years ended December 31,
1999, 1998, and 1997, respectively. Future minimum lease commitments under all
noncancellable capital and operating leases at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Capital Operating
leases leases
------- ---------
(in thousands)
<S> <C> <C>
2000 ....................................... $ 217 $1,249
2001 ....................................... 30 1,086
2002 ....................................... -- 976
2003 ....................................... -- 821
2004 ....................................... -- 540
------ ------
Total minimum lease payments ............... 247 $4,672
======
Less: amount representing interest ......... 13
------
Present value of net minimum lease payments,
including current maturities of $205 ..... $ 234
======
</TABLE>
In January 1999, OneSource entered into a five-year noncancellable
operating lease for a new operating facility. Minimum yearly rental payments
will be $655,000, commencing in June 1999. Pursuant to the lease, OneSource
entered into a $415,000 irrevocable letter of credit collateralized by a
certificate of deposit.
Restricted Time Deposits
In connection with several facility leases, OneSource is required to
maintain, on behalf of the landlord, irrevocable letters of credit with a bank
in the total amount of $703,000 over the term of the leases. In addition,
OneSource was required to maintain certificates of deposit in equal amounts as
security for the letters of credit.
15. GEOGRAPHIC INFORMATION
F-20
<PAGE> 57
Revenue was distributed geographically as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------
1999 1998 1997
---- ---- ----
(in thousands)
<S> <C> <C> <C>
United States ................................. $27,543 $23,428 $24,193
United Kingdom ................................ 8,005 7,000 6,191
------- ------- -------
$35,548 $30,428 $30,384
======= ======= =======
</TABLE>
Substantially all of OneSource's identifiable assets are located in the
United States.
16. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The following is the supplemental cash flow information for all periods
presented:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1999 1998 1997
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid for interest ...................................................... $810 $209 $301
Cash paid for taxes ......................................................... 162 175 --
Noncash investing and financing activities:
Additions to capital lease obligations for purchases of fixed assets......... $ -- $183 $ 87
Additions to capital lease obligations for sale and leaseback of
fixed assets .............................................................. -- 228 753
Additions to long-term debt for accrued interest ............................ -- 489 480
Exchange of property and equipment for the retirement of capital
lease obligations ......................................................... -- 41 --
</TABLE>
F-21
<PAGE> 58
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of OneSource Information Services, Inc.:
Our audits of the consolidated financial statements referred to in our report
dated January 28, 2000 listed in the index appearing under Item 14(a)(1) on page
32 also included an audit of the financial statement schedules listed in Item
14(a)(2) on page 32 of the Form 10-K. In our opinion, these financial statement
schedules presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
January 28, 2000
S-1
<PAGE> 59
SCHEDULE II- - VALUATION AND QUALIFYING ACCOUNTS
ONESOURCE INFORMATION SERVICES, INC.
(In thousands)
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING OF CHARGED TO BALANCE AT
DESCRIPTION PERIOD OPERATIONS DEDUCTIONS(1) END OF PERIOD
- ----------- ------------ ---------- ------------- -------------
<S> <C> <C> <C> <C>
Year ended December 31, 1997
Reserves and allowances deducted
from asset accounts:
Allowance for doubtful
accounts ............................. $ 161 $ 72 $ 23 $ 210
Deferred tax asset valuation
allowance ............................ $3,800 $ 744 -- $4,544
Year ended December 31, 1998
Reserves and allowances deducted
from asset accounts:
Allowance for doubtful
accounts ............................. $ 210 $ 120 $ 30 $ 300
Deferred tax asset valuation
allowance ............................ $4,544 -- $2,776 $1,768
Year ended December 31, 1999
Reserves and allowances deducted
from asset accounts:
Allowance for doubtful
accounts ............................. $ 300 $ 96 $ 48 $ 348
Deferred tax asset valuation
allowance ............................ $1,768 $2,090 -- $3,858
</TABLE>
(1) Doubtful accounts written off, net of recoveries.
S-2
<PAGE> 1
Exhibit 23.02
CONSENT OF INDEPENDENT ACCOUNTANT
We hereby consent to the incorporation by reference into the Registration
Statement on Form S-8 (No. 333-85363) of our reports dated January 29, 2000
relating to the consolidated financial statements and financial statement
schedules, which appear in the Annual Report on Form 10-K of OneSource
Information Services, Inc. for the year ended December 31, 1999.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 29, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ONESOURCE INFORMATION SERVICES, INC. ANNUAL REPORT ON FORM 10-K FOR THE PERIOD
ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 13,598
<SECURITIES> 0
<RECEIVABLES> 14,768
<ALLOWANCES> 348
<INVENTORY> 43
<CURRENT-ASSETS> 35,615
<PP&E> 6,374
<DEPRECIATION> 2,952
<TOTAL-ASSETS> 49,698
<CURRENT-LIABILITIES> 36,306
<BONDS> 0
0
0
<COMMON> 104
<OTHER-SE> 13,259
<TOTAL-LIABILITY-AND-EQUITY> 49,698
<SALES> 35,548
<TOTAL-REVENUES> 35,548
<CGS> 14,809
<TOTAL-COSTS> 14,809
<OTHER-EXPENSES> 27,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (47)
<INCOME-PRETAX> (4,314)
<INCOME-TAX> 133
<INCOME-CONTINUING> (4,447)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,447)
<EPS-BASIC> (0.50)
<EPS-DILUTED> (0.50)
</TABLE>
