FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED SEPTEMBER 30,
1999
COMMISSION FILE NUMBER 0-17508
TELESCAN, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 72-1121748
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5959 CORPORATE DRIVE, SUITE 2000, HOUSTON, TEXAS 77036
(Address of principal executive offices) (Zip Code)
(281) 588-9700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
$.01 par value per share Common Stock: 16,503,667 as of November 11, 1999.
<PAGE>
TELESCAN, INC. AND SUBSIDIARIES
Report on Form 10-Q
Quarter Ended September 30, 1999
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.................................... 3
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings....................................... 19
ITEM 2. Changes in Securities................................... 19
ITEM 3. Defaults upon Senior Securities......................... 19
ITEM 4. Submission of Matters to a Vote of Security Holders..... 19
ITEM 5. Other Information....................................... 20
ITEM 6. Exhibits and Reports on Form 8-K........................ 24
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TELESCAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------- -------------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................................ $ 17,498 $ 1,065
Restricted cash .......................................................... -- 114
Accounts receivable, net ................................................. 4,212 1,904
Receivables from affiliates .............................................. 805 643
Notes receivable, current ................................................ 1,343 793
Prepaid expenses ......................................................... 246 376
Inventory ................................................................ 33 53
Other current assets ..................................................... 286 235
-------- --------
Total current assets ................................................. 24,423 5,183
Marketable securities, at market ............................................ 17,157 --
Notes receivable, non-current ............................................... 25 59
Property and equipment, net ................................................. 3,109 1,916
Software development costs, net ............................................. 4,812 5,331
Software technology rights, net ............................................. 144 196
Capitalized data costs, net ................................................. 61 150
Investments ................................................................. 1,284 20
Other assets, net ........................................................... 241 85
======== ========
Total assets ......................................................... $ 51,256 $ 12,940
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ......................................................... $ 2,510 $ 2,661
Accrued liabilities ...................................................... 694 711
Deferred revenues ........................................................ 2,800 643
Current portion of long-term debt and capital lease obligations .......... 629 2,699
Amounts due to stockholders and affiliates ............................... 36 109
-------- --------
Total current liabilities ............................................ 6,669 6,823
Long-term debt .............................................................. -- 16
Capital lease obligations ................................................... 354 327
Contingencies (Note 2) ...................................................... -- --
Stockholders' equity
Preferred stock, $.01 par value; 10,000,000 shares
authorized; 5% Cumulative Convertible Preferred
Stock - 120,000 shares issued and outstanding ........................ 1 1
Common stock; $.01 par value; 30,000,000 shares authorized
at June 30, 1999 and 15,000,000 shares authorized at
December 31, 1998; 16,483,540 and 13,214,768 shares
issued and outstanding in 1999 and 1998, respectively ................ 164 132
Additional paid-in capital ............................................... 66,464 25,509
Accumulated other comprehensive income ................................... 118 --
Accumulated deficit ...................................................... (22,514) (19,868)
-------- --------
Total stockholders' equity ............................................ 44,233 5,774
======== ========
Total liabilities and stockholders' equity ............................ $ 51,256 $ 12,940
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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TELESCAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
1999 1998 1999 1998
-------- -------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenue:
Service and license fees ................................... $ 7,956 $ 4,577 $ 19,902 $ 11,623
Products ................................................... 87 154 396 534
Contract revenue earned from affiliates .................... 342 255 968 924
-------- -------- -------- --------
Total revenue ............................................ 8,385 4,986 21,266 13,081
Cost and expenses:
Cost of service ............................................ 3,484 2,316 9,704 6,906
Cost of products ........................................... 83 82 270 261
Research and development expenses .......................... 159 213 431 457
Selling and marketing expenses ............................. 1,255 1,034 3,484 2,770
General and administrative expenses ........................ 2,689 1,680 6,564 4,860
Acquisition costs .......................................... 106 -- 3,287 --
Interest expense ........................................... 23 210 162 435
-------- -------- -------- --------
Total costs and expenses ................................ 7,799 5,535 23,902 15,689
-------- -------- -------- --------
Income (loss) before minority interest ......................... 586 (549) (2,636) (2,608)
Minority interest in loss of subsidiary ........................ 44 15 106 115
-------- -------- -------- --------
Net income (loss) .............................................. 630 (534) (2,530) (2,493)
Preferred stock dividends ...................................... (38) (38) (113) (57)
Incremental yield dividend ..................................... -- -- -- (44)
Net income (loss) attributable to common
-------- -------- -------- --------
Shareholders .............................................. $ 592 $ (572) $ (2,643) $ (2,594)
-------- -------- -------- --------
Net income (loss) per common share:
Basic ...................................................... $ 0.04 $ (0.04) $ (0.17) $ (0.20)
Diluted .................................................... $ 0.04 $ (0.04) $ (0.17) $ (0.20)
Weighted average shares:
Basic ...................................................... 15,919 13,200 15,160 13,151
Diluted .................................................... 16,648 13,200 15,160 13,151
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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TELESCAN, INC. AND SUBSIDIARIES
STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- ------------------------------
1999 1998 1999 1998
---------- ----------- ----------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net income (loss) .............................. $ 630 $ (534) $(2,530) $(2,493)
Other comprehensive income, net of tax:
Unrealized holding gains (losses)
arising during period ................. (364) -- 118 --
------- ------- ------- -------
Comprehensive income (loss) .................... $ 266 $ (534) $(2,412) $(2,493)
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
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TELESCAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------------------
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
-------------------- ---------------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss .................................................................. $ (2,530) $ (2,493)
Adjustments to reconcile net loss to net cash used in
Operating activities:
Minority interest in loss of subsidiary ......................... (106) (115)
Depreciation and amortization ................................... 2,532 2,204
Non-cash license fees ........................................... (3,003) --
Non-cash warrants issued for debt
origination and compensation ............................. 164 275
Provision for doubtful accounts ................................. 49 28
Changes in current assets and liabilities:
Receivables and advances ........................................... (3,700) (1,932)
Other current assets ............................................... 99 88
Accounts payable ................................................... (151) (513)
Deferred revenue ................................................. 284 184
Other current liabilities .......................................... (11) 245
-------- --------
Net cash used in operating activities ........................... (6,373) (2,029)
Cash flows from investing activities:
Additions to property and equipment ................................... (2,002) (293)
Additions to software development costs ............................... (898) (1,913)
Additions to investments .............................................. (6,600) --
Other ................................................................. 114 --
-------- --------
Net cash used in investing activities ........................... (9,386) (2,206)
Cash flows from financing activities:
Capital calls from minority stockholder ............................... 101 96
Proceeds from issuances of common stock ............................... 34,484 405
Proceeds from issuance of 5% convertible preferred stock .............. -- 3,000
Preferred dividends paid .............................................. (113) (57)
Proceeds from notes payable ........................................... -- 2,042
Payments on notes payable and capital lease obligations ............... (2,547) (395)
Payments to stockholder ............................................... (73) (154)
Additions to capital lease obligations ................................ 340 --
-------- --------
Net cash provided by financing activities ....................... 32,192 4,937
-------- --------
Net change in cash and cash equivalents ................................... 16,433 702
Cash and cash equivalents:
Beginning of period ................................................... 1,065 1,500
======== ========
End of period ......................................................... $ 17,498 $ 2,202
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
TELESCAN, INC. AND SUBSIDIARIES
SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------------------
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------- ------------------
(unaudited)
<S> <C> <C>
Cash paid for:
Interest ......................................................... $ 248 $ 89
======== ========
Company common stock exchanged for investment in GlobalNet
Financial.com, Inc. .............................................. $ 6,045 $ --
Marketable securities received for cash .............................. 6,000 --
Marketable securities received for licensing fees .................... 2,510 --
Marketable securities received for services .......................... 2,365 --
-------- --------
Cost basis of marketable securities .................................. $ 16,920 $ --
Unrealized gain ...................................................... 237 --
======== ========
$ 17,157 $ --
======== ========
Company common stock exchanged for option to purchase additional
shares in GlobalNet Financial.com, Inc. .......................... $ 291 $ --
Unrealized loss on options ........................................... (119) --
======== ========
$ 172 $ --
======== ========
Computer equipment acquired under long-term capital leases ........... $ 149 $ 306
Incremental yield on preferred stock ................................. $ -- $ 44
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
TELESCAN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed consolidated financial statements reflect the accounts of
Telescan, Inc. (the "Company") and its wholly and majority owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
The condensed consolidated financial statements and notes thereto at September
30, 1999 and for the nine and three-month periods ended September 30, 1999
reflect the May 31, 1999 acquisition of INVESTools, Inc. ("INVESTools"). The
acquisition was accounted for as a pooling-of-interests. Accordingly, the
condensed consolidated financial statements of the Company for the periods
preceding the INVESTools transaction have been restated. Prior to the
acquisition, INVESTools had a fiscal year end of June 30. Comparative numbers
for fiscal year 1998 combine the three and nine months ended September 30, 1998
for the Company and the three and nine months ended March 31, 1998 for
INVESTools.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with Rule 10-01 of Regulation S-X for interim financial
statements required to be filed with the Securities and Exchange Commission and
do not include all information and footnotes required by generally accepted
accounting principles. However, in the opinion of management, the information
furnished reflects all adjustments, consisting of normal recurring adjustments,
which are necessary to make a fair presentation of financial position and
operating results for the interim periods.
The accompanying condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements for the year
ended December 31, 1998 for the Company included in the Company's Annual Report
on Form 10-K. The results of operations for the nine-month period ended
September 30, 1999, are not necessarily indicative of the results to be expected
for the full year.
2. CONTINGENCIES
Effective June 11, 1999 the Company terminated its contract with Web Street
Securities, Inc. ("Web Street"). The Company has initiated efforts to recover
approximately $437,000 believed to be owed to the Company by Web Street, by
activating the mandatory mediation provision in the contract. Web Street did not
respond to the notice of mediation and the American Arbitration Association was
contacted to coordinate the mediation. Mediation procedures are scheduled for
December 13, 1999, at which time the Company will determine if further legal
action is appropriate. As of September 30, 1999 no allowances have been provided
for the potential impairment of this receivable.
From time to time, the Company is involved in various legal proceedings and
claims, either asserted or unasserted, which arise in the ordinary course of
business. It is the opinion of management that such litigation will be resolved
without a material effect on the Company's financial position or results of
operations.
3. MARKETABLE SECURITIES
Marketable securities which represent the Company's investment in the common
stock of GlobalNet Financial.com, Inc. ("GlobalNet," previously named MicroCap
Financial Services, Inc.), Individual Investor Group, Inc., and
Freerealtime.com, Inc., are classified as available-for-sale
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<PAGE>
securities. Available-for-sale securities are carried at fair value, with the
unrealized gains and losses reported as a separate component within
stockholders' equity entitled "accumulated other comprehensive income."
4. COMPREHENSIVE INCOME
Effective June 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which establishes
standards for reporting and display of comprehensive income and its components
in a full set of financial statements. Comprehensive income includes all changes
in a company's equity (except those resulting from investments by and
distributions to owners), including, among other things, foreign currency
translation adjustments, and unrealized gains (losses) on marketable securities
classified as available-for-sale. The adoption of this policy had no effect on
the Company's net income (loss) or stockholders' equity in 1998. Total
comprehensive earnings (loss) for the quarter ended September 30, 1999 and the
nine months ended September 30, 1999 follow (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
-------------------- ---------------------
<S> <C> <C>
Net income (loss) ..................................... $ 630 $(2,530)
Unrealized gain (loss) on marketable securities ....... (364) 118
======= =======
Total comprehensive income (loss) ..................... $ 266 $(2,412)
======= =======
</TABLE>
5. SALE OF UNREGISTERED SECURITIES
In July, 1999, the Company issued 1,111,111 shares of the Company's common stock
to G.E. Capital Equity Investments, Inc. ("G.E.") for $25,000,000. The
additional investment brought G.E.'s equity ownership in the Company to
2,331,348 shares, or 14.2% of the Company's outstanding common stock.
6. SEGMENT REPORTING
The Company operates two major segments, financial and non-financial. The
financial segment includes Internet and online financial and investment advisory
services provided by the Company and its wholly-owned subsidiary, INVESTools,
license fees earned from third parties for private label and co-branded versions
of the Company's proprietary database applications, products and advertising on
the Company's and INVESTools' websites. The non-financial segment includes
Knowledge Express Data Systems, L.C. ("KE"), of which the Company owns 55.58%;
the publishing and entertainment industry operations; and an Internet baseball
game. KE is an online provider of biotechnology/pharmaceutical databases for
universities and research markets. The publishing and entertainment industry
operations encompass the development and operation of online and database
services for publications including Billboard Online, Adweek Online, The
Hollywood Reporter Online and Backstage Online for BPI Communications, L.P. The
sports entertainment operation is an online game designed for baseball
enthusiasts.
Intersegment revenues are eliminated in consolidation. The segment information
below is consistent with the basis of segmentation presented in the Company's
annual report with the inclusion of INVESTools in the financial segment.
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<TABLE>
<CAPTION>
REVENUE BY INDUSTRY SEGMENT
------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------------------- ----------------------------------------
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Financial ..................... $ 7,547 $ 4,451 $19,016 $11,702
Non-Financial ............... 838 535 2,250 1,379
------- ------- ------- -------
Total ......................... $ 8,385 $ 4,986 $21,266 $13,081
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
OPERATING PROFIT BY INDUSTRY SEGMENT
---------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------------------- -----------------------------------------
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Financial .................... $ 612 $ (611) $(2,433) $(2,533)
Non-Financial ................ (20) 39 (210) (61)
------- ------- ------- -------
Total ........................ $ 592 $ (572) $(2,643) $(2,594)
======= ======= ======= =======
</TABLE>
IDENTIFIABLE ASSETS BY INDUSTRY SEGMENT
-----------------------------------------
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
Financial ..................... $50,693 $12,385
Non-Financial ................. 563 555
------- -------
Total ......................... $51,256 $12,940
======= =======
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<TABLE>
<CAPTION>
SPECIFIC ASSETS AND EXPENSES BY INDUSTRY SEGMENT
------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------------------- ---------------------------------------
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Software capitalization:
Financial ........................... $ 345 $ 587 $ 898 $1,716
Non-Financial ....................... -- 70 -- 197
------ ------ ------ ------
Total ............................... $ 345 $ 657 $ 898 $1,913
====== ====== ====== ======
Depreciation and amortization
Expense:
Financial ........................... $ 928 $ 666 $2,443 $1,903
Non-Financial ....................... 11 87 89 301
------ ------ ------ ------
Total ............................... $ 939 $ 753 $2,532 $2,204
====== ====== ====== ======
</TABLE>
The financial segment bears the majority of expenses associated with capital
expenditures and corporate facilities. These include fixed assets and related
depreciation and other non-allocable expenses such as rent, legal, interest and
dividends.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
- --------
Telescan, Inc. (the "Company") is an industry leader in providing Internet
services to financial and publishing service companies, as well as proprietary
analytics and content to individuals. The Company develops and operates Internet
sites and major online networks serving the financial and publishing industries.
The Company's services and products, which are based upon its proprietary online
operating system and user software, allow its customers to electronically access
and analyze information through their personal computer systems.
The Company's primary product line is a system of Internet and online financial
services and products provided directly to users and under private label or
co-branded versions from third parties. Such services allow investors to:
o Obtain financial news and information;
o Perform personalized searches with the Company's optimal search
technology using current and historical information;
o Manage personal portfolios and strategize investment planning; and
o Perform fundamental and technical analyses.
The Company's Internet and online financial services and products contain
proprietary software technologies, developed or acquired by the Company, which
increase the speed, power and user friendliness of information retrieval while
lowering costs to users. The Company's primary financial Internet site, Wall
Street City(R) (HTTP://WWW.WALLSTREETCITY.COM), employs the Company's
proprietary designs as well as data provided by others on a fee and/or revenue
sharing basis.
In May 1999, the Company acquired INVESTools, Inc. ("INVESTools") in exchange
for 2,345,931 shares of the Company's common stock, in a transaction accounted
for as a pooling-of-interests. Of the total shares exchanged, 2,124,976 shares
were issued at the date of acquisition. The remaining 220,955 shares will be
issued upon the exercise of INVESTools stock options assumed by the Company.
INVESTools provides the Company's existing subscribers with new interactive
investment advisory services including e-mail hotlines and discussion boards,
and offers the Company cross marketing opportunities.
The non-financial business segment of the Company includes third party Internet
services, which are hosted and operated via alliances in the publishing,
entertainment, sports and biotechnical/pharmaceutical industries.
Service revenue is generated in the form of Internet and online service fees,
licensing and development fees, fees from third parties, advertising fees,
investment advisory newsletter subscriptions, product sales and affiliate
contract revenue. The Company's Internet and online service revenue is composed
of individual subscribers paying recurring monthly usage fees and annual
subscription fees, together with fees from third parties for licensing and
developing private label or co-branded versions of the Company's database
applications. Advertising revenue is derived from ads placed on the Company's
Wall Street City (HTTP://WWW.WALLSTREETCITY.COM) and INVESTools
(HTTP://WWW.INVESTOOLS.COM) websites and certain third party sites hosted by the
Company and INVESTools. Investment advisory service subscription revenue is
generated from the Company's wholly owned subsidiary, INVESTools. Product
revenue is generated from the sale of online system software, software and
service enhancements, major product upgrades and related educational and
training products such as books and videotapes. The Company's software products
generally reflect a common base technology to which additional features can be
added to satisfy the various needs of the sophisticated user. The Company's
contract revenue is generated from providing contract services to a related
party. The contract
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services include developing, operating and maintaining online database systems
and providing administrative services.
Net income of $592,000 occurred in the third quarter of 1999, primarily due to
license fee revenues of $1,802,000, as compared to license fee revenues of
$1,375,000 and $938,000 for the first and second quarters of 1999. Such license
fees are a single charge for the right to use the Company's technology. Although
these fees are non-recurring, license fees for access to additional databases
may be sold to third parties with existing contracts, or may be derived from new
agreements. Private-labeled recurring revenues were higher with the continuation
of site management fees, content license fees and cost plus reimbursable
expenses associated with previously executed license agreements.
The financial information for the nine months and quarter ended September 30,
1998 has been restated to reflect the acquisition of INVESTools. The restated
results for the three and nine month periods ended September 30, 1998 reflect
the Company's operating results for those periods combined with the operating
results of INVESTools for the three and nine month periods ended March 31, 1998
(see Note 1 to the Condensed Consolidated Financial Statements).
For purposes of the comparison discussion, all references to the period ended
September 30, 1998 refer to the Company's restated operating results.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1998
Total revenues for the nine months ended September 30, 1999 rose $8,185,000, or
63%, over the nine months ended September 30, 1998. Increased revenues occurred
in both the financial and non-financial segments and significant increases in
service revenues were partially offset by slight decreases in product revenue.
Service revenues increased $8,279,000, reflecting a 71% increase for the nine
months ended September 30, 1999 as compared to the first nine months of 1998.
The Internet revenue portion of service revenues increased from $6,367,000 to
$15,556,000. Increased license fees accounted for $2,415,000 of the service
revenue increase. License fees, which allow third parties access to the
Company's technology, and new or additional license fee agreements are
negotiated on a continuing basis. The first nine months of 1999 also include
revenue from NBC of $1,914,000. INVESTools revenue rose from $885,000 to
$2,901,000 for the first nine months of 1998 as compared to the nine months
ended September 30, 1999. Non-Internet revenues decreased $1,312,000 for the
comparable time periods, and online service revenues were lower by $793,000.
Non-financial revenues, which are included in Internet service revenues, rose
$873,000, or 63%, for the nine months ended September 30, 1999 as compared to
the same period in 1998. The significant increase is primarily due to higher
revenues from hosting services provided to several Internet sites operated by
the Company for BPI Communications, L.P.
Product revenues were lower by $138,000, or 26%, for the first nine months of
1999 as compared to the same period in 1998. Product revenue will continue to
decrease as the Company continues to focus its internal resources on the
Internet business and third party alliances.
Contract revenue from affiliates increased from $924,000 for the nine months
ended September 30, 1998 to $968,000 for the nine months ended September 30,
1999, due to an increase in revenues from TeleBuild, L.C.
Cost of service totaled $9,704,000 for the nine months ended September 30, 1999
as compared to $6,906,000 for the nine months ended September 30, 1998. The
increase of $2,798,000, or 41%, is partially attributable to higher revenue
sharing costs, consisting mainly of data and royalty costs increases of $949,000
on increased revenues from both the Company and INVESTools. Costs incurred in
the first nine months of 1999 and which are billable to NBC totaled $1,252,000.
Amortization of software and data costs was $329,000 higher for the nine months
ended September 30, 1999 as compared to the same period in 1998 and was
substantially offset by lower
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communication costs of $167,000. A reduction in communication costs is expected
with the increase in Internet revenues where modem based access is not required.
Cost of service as a percentage of revenues (service and contract) totaled 49%
for the nine months ended September 30, 1999 as compared to 59% for the nine
months ended September 30, 1998. The difference is due to the increase in
license fee revenue, which carries no related costs. INVESTools' cost of
service, as a percentage of revenues, decreased from 42% in the first nine
months of 1998 to 34% for the first nine months of 1999, due to a higher
proportion of advertising and service revenues, which have lower associated
costs.
Cost of products was $9,000 higher for the first nine months of 1999 as compared
to the first nine months in 1998, primarily due to higher customer service
expenses.
Research and development costs for INVESTools were relatively constant for the
first nine months of 1999 as compared to the nine months ended September 30,
1998.
Selling and marketing expenses rose $714,000, or 26%, for the nine months ended
September 30, 1999 as compared to the first nine months of 1998. Salary and
related benefit expense, net of expenses billable to NBC in 1999, were higher by
$648,000 for the comparable time periods. In 1998, the non-financial segment
compensation was capitalized as software development costs. Compensation expense
for the non-financial segment of $450,000 was incurred through September 30,
1999, of which no amounts were capitalized as software development costs.
Further contributing to the higher salary expense was an increase in personnel.
Rent expense allocated to selling and marketing increased by $52,000 from the
first nine months of 1998 as compared to the same period in 1999. Consulting
fees also reflect an increase of $96,000 as compared to the same period in 1998.
The increases in compensation expense, rent expense, and consulting expense
between comparable periods were partially offset by a reduction of $132,000 in
advertising expense, which is being more closely monitored, and reflects reduced
advertising efforts on certain campaigns.
General and administrative expenses rose from $4,860,000 for the first nine
months of 1998 to $6,564,000, or 35%, for the first nine months of 1999. Salary
and related benefit expense, net of amounts capitalized as software development
and amounts billable to NBC, were $824,000 higher for the nine months ended
September 30, 1999 compared to the first nine months of 1998. An increase in
personnel contributed to the higher salary expense. Depreciation/rental
equipment expense rose by $113,000 for the comparable nine month periods. Legal
expenses, excluding expenses associated with the acquisition of INVESTools,
declined $93,000 for the nine months ended September 30, 1999 as compared to the
first nine months of 1998.
Costs incurred with the INVESTools acquisition have been segregated as a
separate expense since such costs are non-recurring. Acquisition costs totaled
$3,287,000 and included fees for legal and accounting services and investment
banking expenses.
Interest expense decreased from $435,000 for the nine months ended September 30,
1998 to $162,000 for the nine months ended September 30, 1999. During the first
nine months of 1998, warrant expense related to INVESTools was recorded in the
amount of $275,000 as compared to $90,000 for the nine months ended September
30, 1999. This expense arose from warrants issued in connection with debt
originated by INVESTools.
QUARTER ENDED SEPTEMBER 30, 1999 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1998
Total revenues rose from $4,986,000 for the quarter ended September 30, 1998 to
$8,385,000 for the quarter ended September 30, 1999. The revenue increase of
$3,399,000, or 68%, is attributable to significant increases in service
revenues, a slight increase in contract revenue, and a partially offsetting
decrease in product revenues.
14
<PAGE>
Service revenues for the quarter ended September 30, 1999 increased by
$3,379,000, or 74%, over the third quarter of 1998. The Internet portion of
service revenue increased from $2,962,000 for the third quarter of 1998 to
$6,570,000 for the three months ended September 30, 1999. Included in this
increase are revenues of $851,000 from NBC. Increased license fees accounted for
$952,000 of the service revenues increase. INVESTools' portion of Internet
revenues grew from $446,000 in the third quarter of 1998 to $1,195,000 for the
quarter ended September 30, 1999. Included in the consolidated Internet revenues
is an increase of $305,000 on increased subscription revenues for the
non-financial segment. Hosting service revenues added $1,021,000 to Internet
service revenues, and advertising sales on the Company's website Wall Street
City were higher by $243,000. Increases in Internet revenues were slightly
offset by reductions in non-Internet revenues, including a decline in the
Company's software based online subscriber revenues of $300,000.
Product revenues declined by $67,000, or 44%, from the quarter ended September
30, 1998 to the quarter ended September 30, 1999, while contract revenues were
higher by $87,000 for the quarter ended September 30, 1999 as compared to the
same quarter in 1998, due to increased revenue from the Company's affiliate,
TeleBuild, L.C.
Cost of service increased $1,168,000, or 50%, for the three months ended
September 30, 1999 as compared to the three months ended September 30, 1998.
Costs associated with fees billable to NBC totaled $528,000 for the third
quarter of 1999 versus none in the third quarter of 1998. Costs associated with
revenue sharing agreements, which consist mainly of royalties and data costs,
rose $296,000 from the third quarter of 1998 to the third quarter of 1999. Cost
of service as a percentage of service revenues was 44% for the quarter ended
September 30, 1999, and 51% for the quarter ended September 30, 1998. The
variation is due to higher advertising and service revenues from INVESTools,
which have lower associated costs.
Cost of products totaled $83,000 for the quarter ended September 30, 1999 and
$82,000 for the same period in 1998. Cost of products as a percentage of product
sales was 95% for the third quarter of 1999 as compared to 53% for the third
quarter of 1998. Lower revenues without corresponding expense reductions
resulted in the higher percentage cost to product sales.
Research and development expenses were lower by $54,000 for the quarter ended
September 30, 1999 as compared to the third quarter of 1998, due to reduced
staffing levels and use of outside resources.
Selling and marketing expenses rose $221,000, or 21%, from the third quarter of
1998 to the quarter ended September 30, 1999. Salary and related benefit expense
were higher by $287,000 in the third quarter of 1999 as compared to the third
quarter of 1998. The third quarter of 1999 includes $150,000 in total
compensation expense for the non-financial group of which no amounts have been
capitalized as software development. For the quarter ended September 30, 1998,
non-financial compensation expense of $70,000 was capitalized as software
development costs. For the third quarter of 1999, the accrual of a bad debt
expense allocated to selling and marketing expense increased by $43,000 as
compared to the third quarter of 1998.
General and administrative expenses increased $1,009,000, or 60%, from the third
quarter of 1998 to the third quarter of 1999. Salary and related benefit
expense, net of amounts capitalized as software development and amounts billable
to NBC, were $65,000 higher for the three months ended September 30, 1999 as
compared to the third quarter of 1998. The higher salary expense is primarily
attributable to increased personnel. Also, a bonus plan accrual of $130,000 was
expensed during the third quarter of 1999 versus no accrual during the third
quarter of 1998. Depreciation/equipment rental expense was higher by $81,000 for
the three months ended September 30, 1999 as compared to the third quarter of
1998. Legal fees and settlement expense allocated to general and administrative
expenses for the three months ended September 30, 1999 was $171,000 lower than
for the third quarter of 1998.
Continued acquisition costs of $106,000 represent additional legal and
accounting expenses incurred with the purchase of INVESTools.
15
<PAGE>
Interest expense decreased from $210,000 in the quarter ended September 30, 1998
to $23,000 for the quarter ended September 30, 1999. During the third quarter of
1998, warrant expense related to INVESTools was recorded as interest expense in
the amount of $136,000 versus no expense during the same quarter of 1999. The
expense arose from warrants issued in connection with debt originated by
INVESTools.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999 the Company had cash and cash equivalents of $17,498,000,
representing an increase of $16,433,000 since December 31, 1998. Net cash used
in operating activities was $5,713,000 for the nine months ended September 30,
1999, compared to $2,029,000 for the nine months ended September 30, 1998. This
$3,684,000 increase in cash used primarily reflects the $2,531,000 loss for the
nine month period ended September 30, 1999, of which $3,287,000 represents costs
associated with the acquisition of INVESTools. Contributing to the increase in
cash used in operations during the nine months ended September 30, 1999 was
non-cash service revenue of $3,003,000, representing common stock received in
lieu of cash in connection with two license agreements.
The Company's primary capital needs are for the continued investment in
technology through software development activities and the purchase of computers
and communications equipment. During the nine months ended September 30, 1999
the Company invested $898,000 in software development costs and $2,002,000
(excluding $149,000 paid directly by the lessor) for capital equipment. The
Company estimates that it may invest up to an additional $1,500,000 in capital
expenditures over the next twelve months. Also during the nine months ended
September 30, 1999, the Company invested $7,264,000 in the common stock of four
companies with which it has related business interests.
In July 1999, the Company issued 1,111,111 shares of its common stock to GE
Capital Equity Investments, Inc. ("GE") for $25,000,000. The investment brings
GE's equity ownership in the Company to 2,331,348 shares, or 14.2%, of the
Company's outstanding common stock.
The Company believes that cash received from the sale of common stock to GE,
combined with cash to be generated from operations, will be sufficient to meet
working capital requirements.
Aggregate revenue from the Company's direct Internet and online services,
including advertising revenue and related product sales, accounted for
approximately 33% of the Company's total revenue for the nine months ended
September 30, 1999. A downturn in the equity markets could cause a reduction in
recurring revenue, which could have an adverse effect on the Company's financial
position and results of operations. To counter the potential impact, if any, of
such a downturn, the Company is continuing its efforts to broaden its revenue
base with the acquisition of INVESTools and through alliances with third parties
to develop and operate Internet based services. Success in these efforts should
increase the level of advertising revenue.
YEAR 2000 READINESS
The potential problems referred to as "Year 2000" or "Y2K" result from systems
using only two digits to indicate the year in a date and thereby not being able
to distinguish between January 1, 1900 and January 1, 2000. In addition, certain
systems may fail to detect that the year 2000 is a leap year.
The Y2K issue affects the Company's internal systems, including information
technology (IT) and non-IT systems. To evaluate these systems, the Company
maintains a task force that addresses software, hardware network, PC and third
party data and communication provider issues. The task force has created a
comprehensive action plan to assess and evaluate existing systems and is
currently implementing replacements
16
<PAGE>
and modifications where necessary. The final phase of the action plan includes
thoroughly testing systems and developing contingency plans as specific problems
are identified.
The Company has completed the assessment phase of its internal hardware
equipment and has upgraded or replaced non-compliant systems. Such upgrades or
replacements were in the ordinary course of business and were included in the
Company's planned capital expenditures. The Company has substantially completed
reviewing internal software applications. Upgrades and modifications are
expected to be completed in the fourth quarter of 1999. The Company believes its
host system, which is considered by management to be the Company's critical
system, is Y2K compliant since this system has control logic based on binary
Julian dates rather than the two-digit format. The Company has identified the
key programs within the host system that perform the majority of the functions
and has begun studying such programs in detail. The Company has corrected any
detectable problems and will continue to perform "mock" Year 2000 trial tests in
the fourth quarter. The Company expects that all phases of Y2K compliance can be
accomplished with current staffing levels. To date, no costs specifically
identified as Y2K remediation costs have been incurred or expensed.
INVESTools, whose host system is located in California, has completed its
assessment and evaluation of its current internal systems for Y2K problems, and
it has developed an action plan which includes thorough testing of systems and
the development of contingency plans to address specific problems as they are
identified. INVESTools is currently implementing replacements and modifications
for internal systems where necessary. These replacements and modifications to
INVESTools' systems and software are substantially complete and the remaining
projects will be completed prior to November 15, 1999. The total Y2K cost is not
expected to be material to INVESTools' operation or financial position.
INVESTools expects it will be able to complete all phases of its Y2K compliance
program with current staffing levels.
The Company's Internet and online services, as well as INVESTools' Internet
service, are highly dependent upon outside communication and third party data
and content providers. The Company and INVESTools have compiled lists of
critical providers and vendors and the Company has contacted its critical
providers in writing regarding their compliance and remediation efforts. To
date, responses have been incomplete and the Company has determined that future
written responses from vendors are unlikely. Most outside vendors have, however,
included Y2K compliance data on their websites and the Company continually
monitors revisions to such information. INVESTools is in the process of
contacting key vendors and assessing outside communication and third party data
and content providers. The Company and INVESTools cannot currently proclaim that
all potential Y2K issues resulting from outside communication and third party
data and content providers will be resolved. INVESTools expects to develop
contingency plans with respect to such third party Y2K matters in the fourth
quarter of 1999.
The most likely worst case scenario is the failure of one or more outside
communication or third party data providers to be Y2K compliant or to change
existing data feed code without notifying the Company. Such failure could
require the Company to incur unanticipated expenses to alter programs to accept
new data feed codes or replace such outside communication or third party data,
if needed, to maintain the Company's products and services at expected levels.
Such action could have a material adverse effect on the Company's business,
results of operations and financial condition. The Company anticipates being
able to determine the worst case scenario by mid-December, 1999. As the
Company's testing phase of internal software applications is completed and the
assessment of outside communication and third party data providers is
determined, the Company will develop an applicable contingency plan for Y2K
issues. The contingency plan to react to the most likely worst case scenario
should be developed by the Company no later than the end of December 1999.
In accordance with the "safe-harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company notes that certain statements in this
Form 10-Q which are forward-looking involve risks and uncertainties that may
impact the Company's results of operations. When used herein, the words
"believe", "anticipate", "estimate", "expect", "should", "intend" and similar
expressions are intended to identify such
17
<PAGE>
forward-looking statements. While these forward-looking statements are made in
good faith, no statement should be relied upon as predictions of future events.
The Company bases certain revenue projections upon marketing efforts by third
parties, which are not controllable. In addition, future operating markets, the
ability to obtain new licensing/development fees, competition, legal and other
conditions could cause actual results to differ materially from those in the
forward-looking statements.
18
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
On July 27, 1999 the Company sold 1,111,111 unregistered shares of its common
stock to G.E. Capital Equity Investments, Inc. for a purchase price of
$25,000,000. The additional investment brought G.E.'s equity ownership in the
Company to 2,331,348 shares, or 14.2%, of the Company's outstanding stock. The
securities were issued pursuant to Section 4(2) of the Securities Act of 1933,
as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Stockholders ("Annual Meeting") on July
28, 1999. The purpose of the Annual Meeting was to elect its directors for the
ensuing year, to ratify amendment of the Amended Stock Option Plan, to ratify
the amendment of the 1995 Stock Option Plan, and to ratify Hein + Associates LLP
as auditors for 1999.
At the Annual Meeting, David L. Brown, Dr. Richard K. Carlin, Laird Foshay,
Christopher A. Glowacki, Dr. Ronald W. Hart, Burt H. Keenan, Russell I. Pillar,
Roy T. Rimmer, Jr., William D. Savoy, Roger C. Wadsworth, and Stephen C. Wood
were elected as directors of the Company. The number of votes for and withheld
are detailed below for each director.
FOR WITHHELD
---------- ----------
David L. Brown 11,957,770 9,586
Dr. Richard K. Carlin 11,957,770 9,586
Laird Foshay 11,957,770 9,586
Christopher A. Glowacki 11,957,770 9,586
Dr. Ronald W. Hart 11,957,770 9,586
Burt H. Keenan 11,957,770 9,586
Russell I. Pillar 11,957,770 9,586
Roy T. Rimmer, Jr. 11,957,770 9,586
William D. Savoy 11,957,770 9,586
Roger C. Wadsworth 11,957,770 9,586
Stephen C. Wood 11,957,770 9,586
The Board of Directors recommended that the stockholders ratify the amendment of
the Amended Stock Option Plan.
19
<PAGE>
The stockholders voted 11,846,609 shares for the ratification of the amendment
of the Amended Stock Option Plan. There were 25,794 abstentions and 94,953 votes
against the ratification of the amendment of the Amended Stock Option Plan.
The Board of Directors recommended that the stockholders ratify the amendment of
the 1995 Stock Option Plan. The stockholders voted 11,852,329 shares for the
ratification of the amendment of the 1995 Stock Option Plan. There were 26,109
abstentions and 88,918 votes against the ratification of the amendment of the
1995 Stock Option Plan.
The Board of Directors recommended that the stockholders ratify their action in
appointing their existing certified public accountants, Hein + Associates LLP,
independent auditors of the Company for the fiscal year ending December 31,
1999. The stockholders voted 11,940,965 shares for the ratification of Hein +
Associates LLP as auditors for 1999. There were 5,610 abstentions and 20,781
votes cast against such ratification.
ITEM 5. OTHER INFORMATION.
SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The following unaudited pro forma combined condensed financial statements are
presented for illustrative purposes only and are not necessarily indicative of
the combined financial position or results of operations of future periods or
the results that actually would have been realized had the Company and
INVESTools been a combined entity during the specified periods. The pro forma
combined condensed financial statements, including the notes thereto, are
qualified in their entirety by reference to, and should be read in conjunction
with, the historical consolidated financial statements of the Company, including
the notes thereto, included elsewhere in this Form 10-Q and the Company's Annual
Report on Form 10-K and the historical financial statements of INVESTools,
including the notes thereto, included in the Company's proxy statement for its
Special Meeting of Stockholders on May 25, 1999.
The following pro forma combined condensed financial statements give effect to
the merger of the Company and INVESTools using the pooling-of-interests method
of accounting. The pro forma combined condensed financial statements are based
on the respective historical audited and unaudited financial statements and the
notes thereto of the Company and INVESTools.
The pro forma combined condensed statements of operations for the years ended
December 31, 1998, 1997 and 1996 assume that the merger took place on January 1,
1996 and combine the Company's audited consolidated statements of operations for
the years ended December 31, 1998, 1997 and 1996 and INVESTools' audited
statements of operations for the years ended June 30, 1998 and 1997 and
unaudited statements of operations for the year ended June 30, 1996.
20
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
TELESCAN INVESTOOLS COMBINED
------------- ------------- -------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C>
Revenues ................................................. $ 13,756 $ 55 $ 13,811
Costs of revenues ........................................ 8,549 37 8,586
Selling, general and administrative expenses ............. 8,403 515 8,918
Research and development ................................. -- 321 321
Interest expense, net .................................... 83 3 86
-------- -------- --------
Total costs and expenses ...................... 17,035 876 17,911
Loss before minority interest in loss of subsidiary ...... (3,279) (821) (4,100)
Minority interest loss ................................... 345 -- 345
-------- -------- --------
Net loss ...................................... $ (2,934) $ (821) $ (3,755)
======== ======== ========
Loss from operations per common share:
Basic and diluted .................................... $ (0.29)
Weighted average shares - basic and diluted .............. 12,740(a)
========
</TABLE>
See notes to unaudited pro forma combined condensed financial data
21
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
TELESCAN INVESTOOLS COMBINED
-------------- --------------- -----------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C>
Revenues ................................................. $ 16,125 $ 391 $ 16,516
Costs of revenues ........................................ 8,756 144 8,900
Selling, general and administrative expenses ............. 7,458 1,034 8,492
Research and development ................................. -- 571 571
Interest expense, net .................................... 105 12 117
-------- -------- --------
Total costs and expenses ...................... 16,319 1,761 18,080
Loss before minority interest in loss of subsidiary ...... (194) (1,370) (1,564)
Minority interest loss ................................... 409 -- 409
-------- -------- --------
Income (loss) from continuing operations ................. 215 (1,370) (1,155)
Loss from discontinued operations ........................ (19) -- (19)
-------- -------- --------
Net income (loss) ............................. $ 196 $ (1,370) $ (1,174)
======== ======== ========
Income (loss) from operations per common share:
Basic and diluted .................................... $ (0.09)
Weighted average shares - basic and diluted .............. 12,891(a)
========
</TABLE>
See notes to unaudited pro forma combined condensed financial data
22
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRO FORMA
TELESCAN INVESTOOLS COMBINED
----------- ------------ --------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C>
Revenues ................................................. $ 15,542 $ 1,504 $ 17,046
Costs of revenues ........................................ 9,152 587 9,739
Selling, general and administrative expenses ............. 9,240 1,835 11,075
Research and development ................................. -- 697 697
Loss on writedown of impaired assets ..................... 1,530 -- 1,530
Interest expense and other, net .......................... 97 548 645
-------- -------- --------
Total costs and expenses ...................... 20,019 3,667 23,686
Loss before minority interest in loss of subsidiary ...... (4,477) (2,163) (6,640)
Minority interest loss ................................... 142 -- 142
-------- -------- --------
Loss from continuing operations .......................... (4,335) (2,163) (6,498)
Income from discontinued operations ...................... 19 -- 19
-------- -------- --------
Net loss ...................................... (4,316) (2,163) (6,479)
Preferred stock dividends ................................ 94 -- 94
Incremental yield dividend ............................... 44 -- 44
-------- -------- --------
Loss available to common stockholders .................... $ (4,454) $ (2,163) $ (6,617)
======== ======== ========
Loss from operations per common share:
Basic and diluted .................................... $ (0.50)
Weighted average shares - basic and diluted .............. 13,164(a)
========
</TABLE>
See notes to unaudited pro forma combined condensed financial data
23
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
BASIS OF PRESENTATION
The results of the Company for the years ended December 31, 1996, 1997 and 1998
have been combined with the results of INVESTools for the years ended June 30,
1996, 1997 and 1998.
Certain revenues and expenses of INVESTools have been reclassified to conform
with the presentation utilized by the Company. The effects of accounting policy
differences are immaterial and have not been adjusted in the unaudited pro forma
combined condensed financial data.
(a) Pro forma weighted average shares outstanding includes 2,124,976 shares
issued by the Company to consummate the merger with INVESTools.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) Exhibits:
10.1 Stock Purchase Agreement, dated as of July 23, 1999, by and
between the Company and G.E. Capital Equity Investments,
Inc. (incorporated by reference to current report on Form
8-K filed July 30, 1999).
(B) Reports on Form 8-K:
A current report on Form 8-K was filed by the Company on
July 30, 1999 announcing the purchase by G.E. Capital
Equity Investments, Inc. ("GE") on July 23, 1999 of
1,111,111 shares of the Company's common stock for an
aggregate purchase price of $25,000,000. No financial
statements were filed.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TELESCAN, INC.
By: /s/ RONALD WARREN
Ronald Warren
President
a duly authorized officer of the Registrant
Date: November 12, 1999
24
TELESCAN, INC. & SUBSIDIARY
CALCULATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
EXHIBIT 11
PAGE 1 OF 2
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- -----------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Basic:
Weighted average number of shares of common stock 15,919 13,200 15,160 13,151
Assumed exercise of certain stock options ........ -- -- -- --
-------- -------- -------- --------
15,919 13,200 15,160 13,151
======== ======== ======== ========
Net income (loss) ................................ $ 592 $ (572) $ (2,643) $ (2,594)
======== ======== ======== ========
Basic earnings per share:
Net income (loss) ................................ $ 0.04 $ (0.04) $ (0.17) $ (0.20)
======== ======== ======== ========
Diluted:
Weighted average number of shares of common stock 15,919 13,200 15,160 13,151
Assumed conversion of preferred stock ............ 348 -- -- --
Assumed exercise of certain stock options ........ 381 -- -- --
-------- -------- -------- --------
16,648 13,200 15,160 13,151
======== ======== ======== ========
Net income (loss) ................................ $ 592 $ (572) $ (2,643) $ (2,594)
======== ======== ======== ========
Diluted earnings per share:
Net income (loss) ................................ $ 0.04 $ (0.04) $ (0.17) $ (0.20)
======== ======== ======== ========
</TABLE>
Note: Due to a loss for the quarter September 30, 1998 and for the nine months
ended September 30, 1998 and 1999, no dilution is reflected. Dilution is only
applicable for the quarter ended September 30, 1999.
<PAGE>
TELESCAN, INC. & SUBSIDIARY
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS)
EXHIBIT 11
PAGE 2 OF 2
<TABLE>
<CAPTION>
DAYS WEIGHTED
SHARES OUTSTANDING SHARES
----------- ---------------- -----------
<S> <C> <C> <C>
Quarter Ended September 30, 1999:
Balance June 30, 1999 ................................. 15,294,950 92 15,294,950
Common stock issuances under stock option plan ........ 1,185,688 48.41 623,860
----------- -----------
Balance September 30, 1999 ............................ 16,480,638 15,918,810
=========== ===========
Nine Months Ended September 30, 1999:
Balance December 31, 1998 ............................. 11,089,792 273 11,089,792
Canceled shares ....................................... (11,651) (11,651)
INVESTools shares issued .............................. 2,124,976 2,124,976
Common stock issuances under stock option plan ........ 3,277,521 163.00 1,956,896
----------- -----------
Balance September 30, 1999 ............................ 16,480,638 15,160,013
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE RESTATED FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM TELESCAN, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 17,498
<SECURITIES> 17,157
<RECEIVABLES> 6,694
<ALLOWANCES> 334
<INVENTORY> 33
<CURRENT-ASSETS> 24,423
<PP&E> 5,841
<DEPRECIATION> 2,732
<TOTAL-ASSETS> 51,256
<CURRENT-LIABILITIES> 6,669
<BONDS> 0
0
1
<COMMON> 164
<OTHER-SE> 44,068
<TOTAL-LIABILITY-AND-EQUITY> 51,256
<SALES> 396
<TOTAL-REVENUES> 21,266
<CGS> 270
<TOTAL-COSTS> 13,889
<OTHER-EXPENSES> 9,851
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 162
<INCOME-PRETAX> (2,636)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,636)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,643)
<EPS-BASIC> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
