SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 2 TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
COMMISSION FILE NO.: 0-20312
VISTA INFORMATION SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1293754
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5060 SHOREHAM PLACE, #300, SAN DIEGO, CA 92122
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (619) 450-6100
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's Consolidated Financial Statements and Notes thereto, and
the Report of its Independent Auditors thereon, are included in this Annual
Report on Form 10-K on pages F-3 to F-21 and on page F-2 of this Report,
respectively.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
(1) FINANCIAL STATEMENTS OF REGISTRANT
The following items are included in this Annual Report on Form 10-K
(page numbers refer to pages in this Annual Report on Form 10-K):
<TABLE>
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Consolidated Financial Statements Page
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<S> <C>
Index to Consolidated Financial Statements................................................ F-1
Report of Independent Auditors............................................................ F-2
Consolidated Statements of Operations..................................................... F-3
Consolidated Balance Sheets............................................................... F-4 to F-5
Consolidated Statements of Changes in Stockholders' Equity (Deficit)...................... F-6
Consolidated Statements of Cash Flows .................................................... F-7
Notes to Consolidated Financial Statements................................................ F-8 to F-21
(2) FINANCIAL STATEMENT SCHEDULES OF REGISTRANT
The following financial statement schedule and report of independent
auditors thereon is included herein and should be read in conjunction with the
financial statements referred to above (page numbers refer to pages in this
Annual Report on Form 10-K):
Report of Independent Auditors on Financial Statement Schedule............................ F-22
Financial Statement Schedule:
II - Valuation and Qualifying Accounts.................................................... F-23
</TABLE>
All other financial statement schedules are omitted because of the
absence of the conditions under which they are required or because the
information required is included in the financial statements or notes thereto.
(3) EXHIBITS.
The exhibits to this Annual Report on Form 10-K are listed in the
Exhibit Index on pages E-1 to E-6 of this Report.
A copy of any of the exhibits listed or referred to above will be
furnished at a reasonable cost to any person who was a shareholder of the
Company as of December 31, 1995, upon receipt from any such person of a written
request for any such exhibit. Such request should be sent to VISTA Information
Solutions, Inc., 5060 Shoreham Place, #300, San Diego, CA 92122 (Attn. Chief
Financial Officer).
The following is a list of each management contract or compensatory
plan or arrangement required to be filed as an exhibit to this Annual Report on
Form 10-K pursuant to Item 14(c):
A. Employment Agreement of John L. Borowicz, effective May 10,
1990, as amended (incorporated by reference to the Company's
Registration Statement on Form 10 (File No. 0-20312)).
B. Employment Agreement of James E. Hovis, dated December 10,
1992 (incorporated by reference to the Company's Annual Report
on Form 10-KSB for the fiscal year ended June 30, 1993 (File
No. 0-20312)).
C. 1990 Stock Option Plan, as amended (incorporated by reference
to the Company's Registration Statement on Form S-8 (File No.
33-73212)).
D. Profit Sharing Plan (incorporated by reference to the
Company's Registration Statement on Form 10 (File No.
0-20312)).
E. 401(k) Plan (incorporated by reference to the Company's
Registration Statement on Form 10 (File No. 0-20312)).
F. 1995 Stock Incentive Plan (incorporated by reference to the
Company's Annual Report on Form 10-K for the period ending
December 31, 1995 (File No. 0-20312)).
G. Employment Agreement with Thomas R. Gay dated February 28,
1995 (incorporated by reference to the Company's Annual Report
on Form 10-K for the period ending December 31, 1994 (File No.
0-20312)).
H. Employment Agreement with Anwar Bhimani dated March 14, 1994
(incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1994 (File No.
0-20312)).
I. Letter Agreement relating to employment of Anwar Bhimani dated
November 16, 1994 (incorporated by reference to the Company's
Annual Report on Form 10-K for the period ending December 31,
1994 (File No. 0-20312)).
J. Employment Agreement with Gary S. Mertz dated February 28,
1995 (incorporated by reference to the Company's Annual Report
on Form 10-K for the period ending December 31, 1994 (File No.
0-20312)).
K. VISTA 1993 Stock Option Plan (incorporated by reference to the
Company's Annual Report on Form 10-K for the period ending
December 31, 1995 (File No. 0-20323)).
(B) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the fourth quarter of the
fiscal year ended December 31, 1995.
(C) EXHIBITS.
The response to this portion of Item 14 is included as a separate
section of this Annual Report on Form 10-K.
(D) FINANCIAL STATEMENT SCHEDULES.
The response to this portion of Item 14 is included as a separate
section of this Annual Report on Form 10-K.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Index to Consolidated Financial Statements F-1
Report of Independent Auditors F-2
Consolidated Statements of Operations F-3
Consolidated Balance Sheets F-4 to F-5
Consolidated Statements of Changes in Stockholders' Equity F-6
(Deficit)
Consolidated Statement of Cash Flows F-7
Notes to Consolidated Financial Statements F-8 to F-21
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
VISTA Information Solutions, Inc.
San Diego, California
We have audited the accompanying consolidated balance sheets of VISTA
Information Solutions, Inc. as of December 31, 1995 and 1994, and the related
consolidated statements of operations, changes in stockholders' deficit, and
cash flows for the years ended December 31, 1995 and 1994, the six months ended
December 31, 1993, and the year ended June 30, 1993. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of VISTA Information
Solutions, Inc. as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years ended December 31, 1995 and 1994,
the six months ended December 31, 1993, and the year ended June 30, 1993, in
conformity with generally accepted accounting principles.
Our previous report on the 1995 financial statements, dated March 6, 1996,
except for the second and third paragraphs of Note 15, as to which the date was
April 10, 1996, included an explanatory paragraph that expressed substantial
doubt about the Company's ability to continue as a going concern. As explained
in Notes 5 and 15, the Company remedied a default under certain convertible
debentures and received the proceeds of $2.5 million of debt financing. Due to
these events, substantial doubt does not remain about the Company's ability to
continue as a going concern.
McGLADREY & PULLEN, LLP
Bloomington, Minnesota
March 6, 1996, except for Note 2, the last paragraph of Note 5 and the second
and third paragraphs of Note 15, as to which the date is April 30, 1996
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 JUNE 30
---------------------------- ------------ ------------
1995 1994 1993 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES (NOTES 14 AND 15) $ 7,839,926 $ 943,209 $ 421,168 $ 382,304
COST OF REVENUES 3,026,009 791,283 299,339 465,773
------------ ------------ ------------ ------------
GROSS MARGIN 4,813,917 151,926 121,829 (83,469)
OPERATING EXPENSES
Selling, general and administrative 6,650,431 2,233,724 755,653 1,757,678
Research and development 1,010,153 1,418,652 345,196 252,980
Depreciation and amortization 3,820,043 167,171 85,970 162,301
Gain on settlement of litigation (Note 7) -- -- -- (169,462)
------------ ------------ ------------ ------------
OPERATING LOSS (6,666,710) (3,667,621) (1,064,990) (2,086,966)
OTHER INCOME (EXPENSE):
Interest income 8,079 56,179 25,597 9,096
Interest expense (403,708) (31,256) (77,072) (161,305)
Other income (Note 7) 41,602 60,000 -- --
------------ ------------ ------------ ------------
NET LOSS ($ 7,020,737) ($ 3,582,698) ($ 1,116,465) ($ 2,239,175)
============ ============ ============ ============
NET LOSS PER SHARE ($ 0.67) ($ 0.44) ($ 0.17) ($ 0.39)
============ ============ ============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 10,542,734 8,222,306 7,142,635 5,680,818
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
ASSETS (NOTES 3 AND 4) 1995 1994
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 21,027 $ 223,913
Trade accounts receivable, less allowance
for doubtful accounts of
$248,500 and $1,500, respectively 1,843,782 97,228
Prepaid expenses 98,756 72,617
------------ ------------
TOTAL CURRENT ASSETS 1,963,565 393,758
EQUIPMENT, FURNITURE AND SOFTWARE, AT COST (NOTE 5)
Equipment and furniture 2,363,148 1,413,095
Purchased software 109,751 102,551
------------ ------------
2,472,899 1,515,646
Less accumulated depreciation and amortization (1,595,965) (1,121,679)
------------ ------------
NET EQUIPMENT, FURNITURE AND SOFTWARE 876,934 393,967
CAPITALIZED SOFTWARE DEVELOPMENT COSTS,
less accumulated amortization of
$1,212,919 and $1,010,594, respectively 104,848 476,610
ACQUIRED TECHNOLOGY AND ENVIRONMENTAL DATABASES
less accumulated amortization of $3,332,229 8,663,795 --
DEPOSITS 105,941 --
------------ ------------
$ 11,715,083 $ 1,264,335
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Note payable to bank (Note 4) $ 1,111,790 $ --
Current maturities of long-term obligations 655,081 4,386
Trade accounts payable 1,029,574 229,036
Accrued development costs (Note 6) 487,500 487,500
Accrued compensation and employee benefits 380,910 55,286
Accrued interest 278,318 --
Other current liabilities 120,007 63,102
------------ ------------
TOTAL CURRENT LIABILITIES 4,063,180 839,310
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES (NOTE 5) 1,624,939 7,146
(COMMITMENTS AND CONTINGENCIES (NOTES 7 AND 8)
STOCKHOLDERS' EQUITY (NOTES 3, 5, 10 AND 11):
Preferred stock, Series B convertible, par value $ 01;
liquidation value $3,000,000,
authorized 200,000 shares; 200,000 shares
issued and outstanding 2,000 2,000
Preferred stock, Series C convertible, par value $.01;
liquidation value $10,765,305,
authorized 670,000 shares; 643,935
shares issued and outstanding 6,439 --
Preferred stock, Series D convertible, par value $.01;
liquidation value $2,499,982,
authorized 240,000 shares; l87,134
shares issued and outstanding 1,871 --
Common stock, par value $ 01; authorized 43,890,000
shares, issued and outstanding 10,989,777
and 8,322,229 shares, respectively 109,898 83,222
Additional paid-in capital 27,097,419 14,502,583
Accumulated deficit (21,190,663) (14,169,926)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 6,026,964 417,879
------------ ------------
$ 11,715,083 $ 1,264,335
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Preferred Common Additional
Stock Stock Paid-in Accumulated
(Note 10) (Note 10) Capital Deficit Total
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1992 $ 627 $ 53,964 $ 6,828,371 ($ 7,069,801) ($ 186,839)
Issuance of preferred stock for:
Cash 350 -- 350,092 -- 350,442
Payment of debt 150 -- 149,408 -- 149,558
Dividend 63 -- 62,637 (62,700) --
Issuance of common stock for:
Cash (net of $13,205 offering costs) -- 753 136,892 -- 137,645
Interest and services -- 211 52,113 -- 52,324
Conversion of debentures -- 109 10,791 -- 10,900
Payment of debt -- 267 53,183 -- 53,450
Under employment agreements -- 1,958 343,834 -- 345,792
Compensation element
of stock options issued -- -- 172,776 -- 172,776
Net loss -- -- -- (2,239,175) (2,239,175)
------------ ------------ ------------ ------------ ------------
BALANCE AT JUNE 30, 1993 1,190 57,262 8,160,097 (9,371,676) (1,153,127)
Issuance of Series B preferred stock
(net of $258,000 offering costs) 2,000 -- 2,740,000 -- 2,742,000
Cash dividend on Series A preferred stock (99,087) (99,087)
Conversion of Series A preferred stock (1,190) 6,957 (5,767) -- --
Issuance of common stock for:
Cash (net of $108,941 offering costs) -- 9,333 1,281,726 -- 1,291,059
Conversion of deferred revenues (Note 6) -- 1,200 298,800 -- 300,000
Conversion of debentures -- 1,376 136,224 -- 137,600
Cash conversion of credit guarantors -- 699 299,501 -- 300,200
Conversion of debt and accrued interest -- 2,082 310,168 -- 312,250
Exercise of incentive stock options -- 7 1,784 -- 1,791
Compensation element
of stock options issued 64,500 -- 64,500
Net loss -- -- -- (1,116,465) (1,116,465)
------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1993 2,000 78,916 13,287,033 (10,587,228) 2,780,721
Issuance of common stock for:
Conversion of debentures (Note 9) -- 3,650 1,091,350 -- 1,095,000
Exercise of incentive stock options -- 656 124,200 -- 124,856
Net loss -- -- -- (3,582,698) (3,582,698)
------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1994 2,000 83,222 14,502,583 (14,169,926) 417,879
Issuance of Series D preferred stock 1,871 -- 2,498,122 -- 2,499,993
Issuance of common and Series C preferred
stock on acquisition of VEI(Note 3) 6,461 26,437 10,096,781 -- 10,129,679
Exercise of incentive stock options 18 132 -- 150
Conversion of Series C preferred stock (22) 221 (199) -- --
Net loss -- -- -- (7,020,737) (7,020,737)
------------ ------------ ------------ ------------ ------------
$ 10,310 $ 109,898 $ 27,097,419 ($21,190,663) $ 6,026,964
============ ============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
-------------------------- ----------- -----------
1995 1994 1993 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($7,020,737) ($3,582,698) ($1,116,465) ($2,239,175)
Adjustments to reconcile net loss to net
cash used in operating activities:
Gain on settlement of litigation -- -- -- (169,462)
Other 25,286 (60,000) -- --
Depreciation 480,256 166,154 85,970 219,782
Amortization 3,749,363 452,813 185,153 273,983
Compensation element of stock options issued -- -- 64,500 172,776
Issuance of common stock for certain expenses:
Officers -- -- -- 103,838
Others -- -- 12,250 52,324
Changes in assets and liabilities,
net of effects of acquisition of VEI:
Accounts receivable - trade (421,906) 33,190 (32,354) (72,015)
Receivable from stockholder -- -- -- 116,620
Prepaid expenses and other assets 114,580 (50,914) 7,289 805
Trade accounts payable 142,055 65,171 90,746 (3,820)
Accrued development costs -- 487,500 -- --
Accrued compensation and employee benefits 186,138 (44,104) (26,195) (68,368)
Deferred revenues -- -- -- 300,000
Other current liabilities (60,859) (31,992) (3,551) 17,350
----------- ----------- ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (2,805,824) (2,564,880) (732,657) (1,295,361)
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and software (261,028) (162,027) (194,729) (119,218)
Additions to capitalized software development costs (42,814) (120,689) (153,032) (225,577)
Cash acquired on acquisition of VEI 29,546 -- -- --
Decrease in short-term investments -- 80,000 95,000 --
----------- ----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (274,296) (202,716) (252,761) (344,795)
=========== =========== =========== ===========
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under note payable to bank 390,493 -- (565,000) --
Proceeds from notes payable to officers and shareholders -- -- -- 300,000
Payments on notes payable to officers and shareholders (250,005) (10,520) (49,232) (221,210)
Payments on long-term obligations (208,425) (11,428) (21,244) (97,881)
Proceeds from issuance of preferred stock 2,499,021 200,000 2,542,000 350,442
Payment of dividends to preferred shareholders -- -- (99,087) --
Proceeds from issuance of common stock 150 124,856 1,593,050 137,645
Proceeds from issuance of debentures 446,000 -- 100,000 1,000,000
----------- ----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,877,234 302,908 3,500,487 1,468,996
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (202,886) (2,464,688) 2,515,069 (171,161)
Cash and cash equivalents at beginning of period 223,913 2,688,601 173,532 344,692
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 21,027 $ 223,913 $ 2,688,601 $ 173,531
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
AND NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for interest $ 221,380 $ 78,332 $ 79,422 $ 83,160
Deferred revenues converted into common stock -- -- 300,000 --
Note from stockholder converted into common stock -- -- 300,000 183,558
Stock subscription receivable -- -- 200,000 --
Convertible debentures converted into common stock -- 1,095,000 137,600 10,900
Accounts payable converted to notes payable 390,453 -- -- --
</TABLE>
See Notes to Consolidated Financial Statements
VISTA INFORMATION SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
BUSINESS - VISTA Information Solutions, Inc. (the "Company") is an
information company that provides environmental risk information and
address-based hazard and classification information to bankers, engineers,
insurance companies and corporations throughout the United States.
As discussed in Note 3, after the acquisition of VISTA Environmental
Information, Inc. (VEI), the Board of Directors of the Company approved a
change in the name for the Company from DataMap, Inc. to VISTA Information
Solutions, Inc..
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of VISTA Information Solutions, Inc. and its wholly owned
subsidiary, VISTA Environmental Information, Inc. (VEI). All significant
intercompany accounts and transactions have been eliminated in consolidation.
REVENUES - The Company recognizes revenue in the month in which product is
shipped or in which information is transmitted to the customer. The Company
extends credit to certain customers, located throughout the United States,
generally on a net 30 basis.
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - At December 31, 1995
the Company adopted Statement of Financial Accounting Standards No. 107,
Disclosures about Fair Value of Financial Instruments. The following methods
and assumptions were used to estimate the fair value of each class of
financial instruments for which it is practicable to estimate that value:
Long-term obligations: The fair value of the Company's long-term
obligations is estimated based on the quoted market prices for the same
or similar issues or on the current rates offered to the Company for
debt of the same remaining maturities with similar collateral
requirements. At December 31, 1995 the fair value of the Company's
long-term obligations approximated its current value.
CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, cash and
cash equivalents include cash on hand and any Treasury bills, commercial
paper, and money market funds with an initial maturity of three months or
less. The Company maintains its cash in bank deposits and certificates of
deposit which, at times, exceeded federally insured limits. The Company has
not experienced any losses on such accounts.
DEPRECIATION AND AMORTIZATION - Depreciation and amortization are provided
using the accelerated and the straight-line methods based on the estimated
useful lives of individual assets over the following periods:
Years
-----
Equipment and furniture 3-7
Purchased software 3
Capitalized software development costs 3
Acquired technology and
environmental databases 3
The Company reviews its intangibles periodically to determine potential
impairment by comparing the carrying value of the intangibles with estimated
future cash flows expected to result from the use of the assets, including
cash flows from disposition. Should the sum of the expected future net cash
flows be less than the carrying value, the Company would determine whether an
impairment loss should be recognized. An impairment loss would be measured by
comparing the amount by which the carrying value exceeds the fair value of
the business. Fair value will be determined based on appraised market value.
To date, management has determined that no impairment of intangibles exists.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS - Software development costs incurred
after the establishment of the software's technological feasibility are
capitalized. The establishment of technological feasibility and the on-going
assessment of recovery of capitalized software costs requires considerable
judgment by management with respect to certain factors, including, but not
limited to, technological feasibility, anticipated future gross revenues,
estimated economic life and changes in software and hardware technologies.
Capitalization ceases when the software is available for general release to
customers at which time amortization of the capitalized costs begin. These
costs are being amortized using the straight-line method over three years.
The recoverability of capitalized software costs is periodically evaluated by
management and provisions for estimated losses, if any, are recorded in the
period such losses are determined.
INCOME TAXES - Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their
tax bases. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment.
RESEARCH AND DEVELOPMENT COSTS - Research and development costs are charged
to expense as incurred. The Company is involved in activities which include
continual development of new products and improving existing products.
ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires 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 period. Actual results could differ from those estimates.
ACCOUNTING PRONOUNCEMENTS - In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123
(SFAS 123), Accounting for Stock-Based Compensation. SFAS 123 establishes
financial accounting and reporting standards for stock-based compensation
plans. SFAS 123 encourages the adoption of a fair value based method of
accounting for stock-based compensation plans, but also allows entities to
continue to measure compensation cost using the intrinsic value based method
of accounting prescribed by APB Opinion No. 25, Accounting for Stock Issued
to Employees. Entities electing to remain with the accounting in Opinion No.
25 must make pro forma disclosures of net income and earnings per share as if
the fair value based method had been applied.
SFAS 123 is effective for the year ending December 31, 1996. The Company has
decided to continue to measure compensation cost using APB Opinion No. 25,
but will provide the pro forma disclosures required under SFAS 123.
LOSS PER SHARE - The loss per common share data was computed by dividing net
loss by the weighted average number of shares of common stock outstanding
during the period. Common stock equivalents, consisting of options, warrants
and convertible securities, are not included in the calculation as their
effect is anti-dilutive.
RECLASSIFICATIONS - Certain reclassifications have been made to the financial
statements for the periods ended December 31, 1994 and 1993 and June 30, 1993
in order to conform to the presentation used for the year ended December 31,
1995. These reclassifications had no effect on net loss or stockholders'
equity as previously reported.
CHANGE IN YEAR END - Subsequent to its fiscal year ended June 30, 1993, and
beginning with December 31, 1993, the Company changed its year end to
December 31. For transition period comparability, the unaudited revenues,
gross deficit, net loss and net loss per share for the six months ended
December 31, 1992 were approximately $117,000, $113,000, $1,199,000 and
$0.21, respectively. This information, as well as the unaudited pro forma
statements in Note 3, include all adjustments (consisting of normal,
recurring accruals) necessary for a fair presentation off the results for the
periods presented.
2. CORPORATE LIQUIDITY
The financial statements have been prepared on a going-concern basis that
contemplates the recoverability of assets and the satisfaction of liabilities
in the ordinary course of business. The Company has incurred a loss of
$7,020,737 for the year ended December 31, 1995, has an accumulated deficit
of $21,190,663 and has negative working capital of $2,099,615.
Management of the Company believes that the Company's liquidity is dependent
upon raising adequate capital to fund the operations of the Company until it
becomes profitable. In that regard, subsequent to year end, the Company
obtained a $500,000 loan from ISO (See Note 6), obtained a $170,000 bridge
loan (See Note 15) and obtained $2,500,000 of senior debentures (See Note
15). The Company believes that the capital received from ISO, the bridge loan
and the $2,500,000 debentures, along with anticipated revenue increases and
overhead reductions, will provide adequate liquidity to fund 1996 operations.
3. ACQUISITION OF VISTA ENVIRONMENTAL INFORMATION, INC.
On February 28, 1995, the Company acquired all the outstanding stock of VISTA
Environmental Information, Inc. (VEI) in exchange for newly issued common and
preferred shares of the Company. Under the terms of the agreement, the
shareholders of VEI received 2,643,694 shares of common stock and 646,141
shares of Series C preferred stock, which are convertible into an aggregate
of 6,461,410 shares of common stock. Option and warrant holders of VEI were
issued options and warrants to purchase approximately 1,500,000 common
equivalent shares of the Company, at prices ranging from $0.04 to $2.51, in
replacement of their VEI options and warrants at exercise prices equal to the
pre-merger exercise price adjusted for the conversion ratio.
The merger was structured based on the companies having equal value. Before
the merger, the Company (DataMap) and VEI had common and common equivalents
shares, consisting of convertible preferred stock, options and warrants, of
approximately 12,716,000 and 17,594,000 respectively. For purposes of the
conversion, only options and warrants for both companies with exercise prices
below an agreed upon price of $2 were considered. As a result, the Company
issued approximately 10,600,000 common and common equivalent shares as
described above, resulting in the former VEI shareholders owning 50% of the
combined company. However, as a condition to the closing of the merger,
DataMap was required to obtain additional financing of at least $1,500,000.
As a result, DataMap sold 112,280 shares of Series D preferred stock for
$1,500,000, convertible into 1,122,800 shares of common stock (See Note 10),
93,563 shares were sold to DataMap's current preferred shareholders and
18,713 shares were sold to VEI preferred shareholders. Taking into account
this transaction, the DataMap shareholder group owned approximately 52% of
the combined company. Due to this voting control and other considerations,
DataMap was determined to be the accounting acquiror.
The acquisition has been accounted for as a purchase, and accordingly, the
operating results of VEI have been included in the operating results of the
Company from the date of acquisition. The total purchase price is calculated
as follows:
Fair value of common stock issued $ 2,590,820
Fair value of preferred stock issued 6,332,182
Fair value of options and warrants issued 1,207,650
Cash payments for fractional shares (973)
-----------
Total fair value of securities issued 10,129,679
Excess liabilities assumed, including
direct merger costs of $276,000 (a) 1,866,345
-----------
Total purchase price, allocated to acquired
technology and environmental databases $11,996,024
===========
(a) The excess liabilities assumed consisted of current assets of
approximately $1,470,000, long-term assets of $861,000, current liabilities
of $3,179,000 and long-term liabilities of $742,000.
The Company valued the securities issued at $.98, which represents a 30%
discount from the market price of the Company's common stock on the
acquisition date. The Company had originally anticipated a portion of the
purchase price be allocated to purchased research and development. The
finalization of the purchase price allocation resulted in no significant
value assigned to purchased research and development and accordingly, the
amortization decreased by approximately $854,000 in the fourth quarter.
The following statements of operations, prepared on a pro forma basis for the
years ended December 31, 1995 and 1994 presents the results of operations of
the Company and VEI as if the acquisition had occurred on January 1, 1995 and
1994, respectively. Annual amortization charges of $3,998,675 are included in
the pro forma statements of operations, reflecting the amortization of
intangibles from the write up of the assets of VEI. The pro forma results are
not necessarily indicative of what actually would have occurred if the
acquisition had taken place on January 1, 1995 and 1994, respectively. In
addition, they are not intended to be a projection of future results and do
not reflect any synergies that might be achieved from combined operations.
PRO FORMA STATEMENTS OF OPERATIONS (UNAUDITED)
December 31
1995 1994
------------ ------------
Revenues $ 8,900,955 $ 8,296,558
------------ ------------
Gross margin 5,274,033 4,846,147
------------ ------------
Operating loss (7,572,860) (9,018,276)
Other income (expense) (405,075) (158,091)
------------ ------------
Net loss ($ 7,977,935) ($ 9,176,367)
============ ============
Pro forma net loss per share ($ .73) ($ 0.84)
Pro forma weighted average
common shares outstanding 10,970,071 10,866,000
4. NOTE PAYABLE TO BANK
The Company has a factoring agreement with a financial institution expiring
in June, 1996. Transactions under the agreement are not treated as a sale of
receivables due to the existence of repurchase obligations. The borrowings
under this arrangement are collateralized by all the assets of VEI. The
borrowing arrangement allows the Company to borrow up to 80% of eligible
receivables up to a maximum of $1,562,500. Outstanding amounts bear interest
at the rate of 1.75% per month of all receivables used in the borrowing base.
There are additional administrative fees of 1% per month charged by the
lender based on the value of the receivables submitted for borrowing.
Subsequent to year end, the agreement was modified to lower the interest rate
to 1.65% per month.
5. LONG-TERM OBLIGATIONS
Long-term obligations consisted of the following:
December 31
1995 1994
---------- ----------
Convertible subordinated debentures -
Interest at prime plus 2.5%,
due January 1997, unsecured (a) $ 898,928 --
Convertible subordinated debentures -
Interest only at 16%, due quarterly,
unsecured (b) 446,000 --
Note payable to vendor - 10.25%, due
in monthly installments of $36,151,
commencing April 1996, including
interest, to March 1997, unsecured 390,453 --
Leases - 7.69%-20.25%, due in monthly
installments of $173 to $5,899, including
interest, to September 2000,
secured by equipment 544,639 11,532
---------- ----------
$2,280,020 $ 11,532
Less current maturities 655,081 4,386
---------- ----------
$1,624,939 $ 7,146
========== ==========
(a) The debentures are convertible into Series C preferred stock at a rate of
$16.72 per share. At December 31, 1995, the debentures, including accrued
interest, were convertible into approximately 63,000 shares of Series C
preferred stock. The debentures are due each January. If the Company does not
elect to repay the amount outstanding, the holder then has the option to
either convert the entire amount into Series C preferred stock or extend the
debenture for one year and receive additional warrants. In January 1996, the
Company did not repay the debentures. As a result, the holders elected to
extend the debentures to January 1997 and received warrants for the purchase
of 3,732 shares of Series C preferred stock at $16.72 per share. (See Note 11
for cumulative warrants issued in connection with these debentures.)
(b) In connection with these debentures, the Company issued warrants to
purchase 246,137 shares of Common Stock at $0.906 per share (See Note 11).
The debentures automatically convert into common stock at $0.75 per share if
they are not repaid by April 1, 1996. However, the Company was in default
under these obligations, as the quarterly interest payments had not been
made. The Company remedied this default by offering the holders the option to
either (i) automatically convert at $.75 per share (ii)extend the debentures
to March, 1997 under the same terms with an option to convert the balance to
common stock at 70% of the then fair market value or (iii) be repaid. One
debenture holder elected to be repaid ($20,000 principal) and all other
holders elected options (i) or (ii).
The annual maturities of long-term obligations, including capital leases, as
of December 31, 1995 were as follows:
1996 $ 655,081
1997 1,551,646
1998 53,255
1999 12,114
2000 7,924
-----------
$2,280,020
6. ISO AGREEMENT
In October 1992, the Company and Insurance Services Office, Inc. (ISO), an
association of 1,500 participating insurance companies which collectively
write 80% of all property and casualty insurance in the U.S., signed a 15
year mutually exclusive contract to offer a national system to electronically
provide geographically - based information to insurers. The Geographic
Underwriting System (GUS(R)) project links the Company's proprietary GIS
technology with ISO's insurance underwriting (some of which is proprietary),
as well as with information from selected third party information providers.
Under the provisions of the agreement, the Company will provide its GUS(R)
software and support and ISO will provide sales, marketing, billing and
maintenance of the communications network to the GUS(R) users. The Company
and ISO generally share project revenues equally, net of any payments to
third party information providers. The Company's share of revenues under this
agreement were $354,614 and $221,056 for the years ended December 31, 1995
and 1994, respectively, $143,293 for the six months ended December 31, 1993
and $34,731 for the year ended June 30, 1993.
In January of 1994, under the terms of an addendum to the agreement, both
parties agreed to develop a national public protection underwriting data
("PPC") layer for the GUS(R) project. Under terms of this agreement, if
qualified expenses of one party exceeds that of the other ("qualified expense
differential"), the Company with the higher qualified expense differential
will be entitled to reimbursement for 50% of such differential from
incremental revenues generated by this project. In addition, the agreement
specifies that qualified expenses for ISO would not exceed $1.8 million while
the qualified expenses for the Company could not exceed $825,000. The
agreement contemplates that ISO will be the party entitled to the
reimbursement, which will be paid (at ISO's option) by either (1) ISO
receiving 75% of the Company's monthly share of PPC related revenues,
commencing in the month following the month the project is completed, until
the amount is paid, or (2) shares of the Company's Common Stock at the then
market price of the stock. This development is expected to be completed in
1996. During the year ended December 31, 1994, the Company expensed the
maximum of $487,500 for development costs due to ISO under this agreement.
This amount remains accrued as of December 31, 1995.
Subsequent to year end, the Company entered into an agreement with ISO for a
loan, not to exceed $500,000. Advances commenced during the first week of
February, 1996 in increments of $25,000 to $50,000. The advance will bear
interest at a rate of 1% per month on any outstanding amounts, including
interest. Repayment of the advance will be in monthly installments beginning
July 1996. At ISO's option the advance will be repaid by installments of
either (1) 1/6 of the total amount owed plus interest due or (2) reducing
future monthly GUS(R) revenue payments by the amount due, however, the entire
loan must be repaid by December 31, 1996.
During fiscal year ended June 30, 1993, the Company received a $300,000
advance from ISO to complete the development of the GUS(R) service on a
national level. At ISO's option, the amount could be repaid by either (1)
reducing future monthly GUS(R) revenue payments by 10% until the amount was
repaid or (2) by the Company issuing 120,000 shares of common stock valued at
$2.50 per share, which was the fair market value of the stock at the date the
agreement was signed. In September 1993, ISO elected to receive the 120,000
shares of common stock in settlement of this amount.
7. LEASE COMMITMENTS
The Company leases furniture and equipment under leases that meet the
criteria for capital lease classification. The Company also leases its
operating facilities under non-cancelable operating leases. The facility
leases require the payment of taxes, maintenance, utilities and insurance.
Leased assets included in the balance sheets are as follows:
December 31
1995 1994
-------- --------
Equipment and furniture $580,099 $ 20,776
Less accumulated amortization 245,306 15,191
-------- --------
Net leased assets $334,793 $ 5,585
======== ========
Future minimum lease payments under capital leases and noncancelable
operating leases consisted of the following at December 31, 1995:
Capital Operating
Leases Leases
------ ------
Year ending December 31
-----------------------
1996 $395,142 $ 389,794
1997 164,450 356,037
1998 58,124 38,128
1999 13,389 38,128
2000 8,215 34,951
---------- ----------
Total minimum lease payments 639,320 $ 857,038
==========
Less amounts representing interest 94,681
----------
Present value of net minimum
lease payments $ 544,639
==========
In September 1990, the Company negotiated a release from its previous lease
for office space. The release was negotiated with the mortgagor of the
building that succeeded to the rights of the original property owner. Under
the terms of its previous office lease, the Company received $200,000 in cash
and six months free rent from the landlord. An unamortized unearned rent
rebate of $169,462 at June 30, 1992, remained recorded due to a lawsuit filed
against the Company for rent and other damages on September 20, 1991. This
lawsuit was filed by a company which, as a result of a bankruptcy proceeding,
succeeded to the rights and interests of the Company's former landlord. The
lawsuit was dismissed, with prejudice, during fiscal year ended June 30, 1993
in the Company's favor, with the related balance of the unearned rent rebate
taken into income.
Total rent expense under operating leases for the year ended December 31,
1995 and 1994, the six months ended December 31, 1993 and the year ended June
30, 1993 totaled approximately $517,000, $127,000, $64,000, and $127,000,
respectively
OTHER INCOME - A disputed liability of $60,000 relating to a lease agreement
that the Company had accrued in an earlier year was reversed in 1994, as the
likelihood of any cash outlay is remote.
8. RELATED PARTY TRANSACTIONS
The Company entered into an employment agreement with the founder of the
Company, who is also a former Chairman of the Board. Under the terms of the
agreement he is considered an employee in an advisory capacity and received
$56,000 annually through 1995.
The Company, under terms of an agreement with a corporation controlled by a
director of the Company, paid $96,000 annually to the corporation during the
fiscal year ended June 30, 1993 for the services of this director to serve as
the Company's Chief Executive Officer and Chairman of the Board. In addition,
the corporation was issued 191,791 shares valued at $331,292 during fiscal
year ended June 30, 1993, for services rendered pursuant to the agreement. No
additional payments were made under this agreement.
9. CONVERTIBLE SUBORDINATED DEBENTURES
In February 1994, the Company offered the holders of the $1.1 million, 11-1/4%
Convertible Subordinated Debentures ("Debentures") the opportunity to elect to
convert their Debentures into the Company's common stock. As an incentive to
convert, the Company offered certain registration rights to the Debenture
holders if they notified the Company of their irrevocable election to convert by
March 15, 1994. Under its terms, the face amount of the Debentures were
convertible into the Company's common stock at a conversion rate of $3.00 per
share. A total of 303,330 shares of Common Stock was issued in exchange for
$910,000 of Debentures in March of 1994. On June 7, 1994, the registration
statement relating to the registration of these shares upon resale became
effective. In May 1994, the Company issued a mandatory redemption notice for the
remaining debentures outstanding of $190,000, resulting in $185,000 being
converted into 61,665 shares of Common Stock. The remaining $5,000 debenture was
redeemed for cash.
10. STOCKHOLDERS' EQUITY (DEFICIT)
PRIVATE PLACEMENTS - In August 1993, the Company sold 933,333 shares of
restricted common stock for $1,400,000. In September 1993, the Company signed
a purchase agreement with an institutional investor to sell an aggregate of
200,000 shares of Series B convertible Preferred stock for $15.00 per share,
discussed below. A commission of $264,000, representing 6% of the gross
proceeds, plus warrants for the purchase of 29,333 shares of the Company's
common stock at $1.50 per share was paid to an investment banker for
assisting in these transactions (See Note 11).
PREFERRED STOCK - The Board of Directors is authorized to issue preferred
stock or other senior securities and determine the series and number of
preferred shares to be issued and any related designations, powers,
preferences, rights, qualifications, limitations or restrictions.
SERIES A PREFERRED STOCK - During fiscal 1990, the Board of Directors
authorized the issuance of up to 500,000 shares of Series A cumulative
convertible preferred stock of par value $.0l for $10 per share. From fiscal
1990 to 1992, the Company sold 107,000 shares for total proceeds of
$1,070,000. The holders of the Series A Preferred stock were entitled to a
dividend in 1991 and 1992 of one additional share of preferred stock for each
ten shares held and a cash dividend of $.80 per share for each year after
1992. In September 1993, in conjunction with the issuance of the Series B
preferred stock, discussed below, the Series A cumulative preferred stock was
converted into 695,731 shares of the Company's common stock. The Company paid
cash dividends of $99,087 in September 1993 to the holders of the Series A
Preferred Stock. During 1995, the Board eliminated the designation and
authorization of the Series A Preferred Stock.
SERIES B PREFERRED STOCK - In September, 1993, the Board of Directors
authorized the issuance of up to 200,000 shares of Series B preferred stock
of par value $.01 par value for $15 per share. The stock has a liquidation
preference of $15.00 per share and is convertible at any time at the holder's
option into ten shares of the Company's common stock, subject to certain
anti-dilution provisions. In September, 1993, the Company entered into a
purchase agreement with an institutional investor and privately sold 150,000
shares of Series B convertible Preferred stock for $15.00 per share. The
Company received $2,250,000 in cash and a commitment for the purchase of an
additional 50,000 shares for $750,000, of which $550,000 was received in 1993
and $200,000 was received in 1994. Among other terms, the purchase agreement
includes provisions for options to purchase 375,000 of the Company's common
stock at prices ranging from $3.00 to $4.30 per share (See Note 11), subject
to adjustment, and the right to designate one nominee for a seat on the Board
of Directors. The Series B Preferred stock has a number of restrictive
covenants including requiring prior approval by the Company of the preferred
stockholders for an increase in the size of the Board of Directors and before
entering into any merger, joint venture, or distribution agreement.
SERIES C PREFERRED STOCK - Under the terms of the acquisition of VEI, the
Company issued 646,141 shares of Series C preferred stock, which are
convertible into an aggregate of 6,461,410 shares of the Company's common
stock. The Series C Preferred Stockholders are entitled to a liquidation
preference of $16.718 per share and are entitled to elect two directors of
the Company. In addition, the Series C Preferred Stockholders have other
rights and preferences including the requirement of an affirmative vote of
the holders of a majority of the outstanding shares of the Series C Preferred
Stockholders to amend the Articles of Incorporation or the Bylaws of the
combined company or increase the size of the Board of directors. During 1995,
2,206 shares of the Series C preferred stock were converted into 22,060
shares of Common Stock.
SERIES D PREFERRED STOCK - During 1995, the Company sold for approximately
$2,500,000, 187,134 shares of Series D Preferred Stock to certain holders of
Series C and Series B Preferred Stock, in a private placement. Each share of
the Series D Preferred Stock is convertible into 10 shares of the Company's
Common Stock. The Series D Preferred Stock has a liquidation preference of
$13.36 per share and other rights and preferences similar to the Series B and
Series C Preferred Stock except that Series D Preferred Stockholders do not
have the right to designate a director, but instead vote, on an
as-if-converted basis, along with the holders of Common Stock in the election
of directors of the Company
CONVERSION OF OBLIGATIONS - In September 1993, aggregate obligations of
$600,000 was converted into common stock of the Company. Deferred revenues
(see Note 6) of $300,000 were converted into 120,000 shares of common stock.
In addition, a note payable of $300,000 (plus accrued interest of $12,250) to
a stockholder was converted into 208,167 shares of common stock. Also, during
the six months ended December 31, 1993, the remaining balance of $137,600
from a $400,000 debenture issuance in 1989 was converted into 137,600 shares
of common stock.
11. STOCK OPTIONS AND INCENTIVE PLANS
The Company has a 1990 Stock Option Plan that reserved 15% of the outstanding
common stock for issuance. At March 15, 1996, 933,192 shares had been issued
under the Plan. With the approval of the 1995 Stock Incentive Plan (see
below), there will be no further grants under the 1990 Plan.
In connection with the acquisition of VEI, the Company assumed VEI's 1993
Stock Option Plan. At March 15, 1995, options for 1,309,713 had been issued
under the Plan. With the approval of the 1995 Stock Incentive Plan (see
below), there will be no further grants under the 1993 Plan.
On March 15, 1995 the Board approved the Company's 1995 Stock Incentive Plan.
The Plan reserves a maximum of 3,000,000 shares for issuance.
Awards granted under the plans are exercisable over a period determined at
the time of grant, not to exceed ten years. The types of awards issuable
under the 1995 Plan are incentive options, non-qualified options, restricted
stock awards, performance units and stock appreciation rights. Incentive
options under the Plan are granted at an exercise price of not less than 100%
of the fair market value at the date of grant and vest over a period of one
to three years. Non-qualified options may be granted at exercise prices not
less than 85% of market value at the date of grant, with vesting determined
at the time of grant. Incentive options must be granted with exercises prices
equal to the fair market value on the date of grant, except that incentive
options granted to persons owning stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company may not be
granted at less that 110% of the fair market value on the date of grant.
The 1995 Plan provides for an annual automatic grant of 10,000 non-qualified
options to non-employee members of the Board of Directors. A summary of the
stock option activity under the plans is as follows:
Options Price Range
Outstanding Per Share
----------- ---------
Outstanding at 6/30/92 580,160 $1.50-$3.85
Granted 224,970 $2.00-$4.25
Expired/Surrendered (6,338) $2.38-$3.50
---------
Outstanding at 6/30/93 798,792 $1.50-$4.25
Granted 26,500 $2.00-$5.25
Exercised (684) $2.38-$3.00
Expired/Surrendered (31,466) $2.38-$3.38
---------
Outstanding at 12/31/93 793,142 $1.50-$5.25
Granted 144,550 $4.13-$5.69
Exercised (65,667) $1.50-$2.38
Expired/Surrendered (8,833) $2.38-$4.13
---------
Outstanding at 12/31/94 863,192 $1.50-$5.69
Granted 1,809,713 $.042-$1.82
Exercised (1,794) $ .084
Expired/Surrendered (487,058) $.042-$5.00
---------
Outstanding at 12/31/95 2,184,053 $.042-$5.69
=========
Of the options granted during the year ended December 31, 1995, 1,309,713
were assumed in conjunction with the merger with VEI (see Note 3).
At December 31, 1995, options granted pursuant to the Plan for the purchase
of 1,610,834 shares of common stock were exercisable.
In addition, the Company has granted options and warrants for the purchase of
common stock outside of the plans to officers, directors, consultants and
certain debt and equity holders as follows (including all options and
warrants to purchase common stock discussed in Notes 5 and 10):
Options and
Warrants Price Range
Outstanding Per Share
----------- ---------
Outstanding at 6/30/92 846,600 $1.50-$4.00
Granted 280,000 $2.00-$4.00
---------
Outstanding at 6/30/93 1,126,600 $1.50-$4.00
Granted 404,333 $1.50-$4.20
---------
Outstanding at 12/31/93 1,530,933 $2.00-$4.30
---------
Outstanding at 12/31/94 1,530,933 $2.00-$4.30
Granted 246,137 $ 0.91
Expired/Surrendered (38,100) $ 1.50
---------
Outstanding at 13/31/95 1,738,970 $0.91-$4.30
=========
At December 31, 1995, options and warrants outside of the Plans for the
purchase of 1,652,071 shares of common stock were exercisable.
In conjunction with current and prior extensions of the $898,928 of
Convertible Subordinated Debentures, the holders have received warrants for
the purchase of 25,374 shares of Series C preferred stock at $16.718 per
share (See Note 5).
For the six months ended December 31, 1993 and the year ended June 30, 1993,
the Company recorded compensation expense of $64,500 and $172,776,
respectively, consisting of the excess of the fair market value over the
exercise price of stock option grants, pursuant to bonus provisions in key
employment agreements. No compensation expense was recorded from stock option
grants during the years ended December 31, 1995 and 1994.
12. INCOME TAXES
As of December 31, 1995, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $21,865,200 available to offset
future taxable income, which include carryforwards from VEI. In addition, the
Company has investment tax and research credit carryforwards of approximately
$99,100. Future utilization of these loss credit carryforwards are subject to
certain limitations under provisions of the Internal Revenue Code including
limitations subject to ss.382, which relates to a 50% change in control over
a three year period, and are further dependent upon the Company attaining
profitable operations. Shares issued to acquire VEI (Note 3) and shares
issued in previous private placement transactions, have caused the Company to
exceed the 50% change in control threshold. This will subject the Company to
annual net operating loss and credit carryforward limitations in the future
and may result in the expiration of a portion of these carryforwards before
they can be utilized. In addition, the net operating losses generated by VEI
before the merger can only be used of offset future VEI income.
A reconciliation of the effective tax rates with the federal statutory rate
is as follows:
<TABLE>
<CAPTION>
Six months
ended Year
Year ended December 31 June 30 ended
-------------------------- ----------- June 30
1995 1994 1993 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income taxes at statutory rate ($2,457,300) ($1,218,100) ($380,000) ($761,000)
Change in valuation allowance, net
of temporary differences acquired in
acquisition of VEI in 1995 1,508,700 1,467,000 447,000 --
Operating loss benefit not recognized -- -- -- 895,000
State taxes (396,000) (245,300) (67,000) (134,000)
Permanent differences 1,344,600 (3,600) -- --
----------- ----------- ----------- -----------
$ 0 $ 0 $ 0 $ 0
=========== =========== =========== ===========
</TABLE>
The tax effect of temporary differences consisted of the following:
December 31
--------------------------
1995 1994
----------- -----------
Net operating loss carryforwards $ 8,746,100 $ 4,705,100
Accrued development costs 195,000 195,000
Compensation element of stock options issued 94,900 94,900
Accrued payroll 94,800 --
Allowance for doubtful accounts 98,800 --
Tax credit carryforwards 99,100 99,100
Depreciation & amortization 30,400 --
Deferred rent (21,600) --
----------- -----------
Gross deferred tax assets 9,337,500 5,094,100
Less valuation allowance 9,337,500 5,094,100
----------- -----------
Net deferred tax asset $ 0 $ 0
=========== ===========
As of December 31, 1995, the Company has net operating loss carryforwards for
federal income tax purposes expiring as follows:
Year ending December 31,
------------------------
1998 $188,200
1999 119,500
2000 38,600
2001 35,600
2002 42,100
2003 438,600
2004 1,385,800
2005 1,378,000
2006 3,852,300
2007 3,460,500
2008 2,562,400
2009 4,533,700
2010 3,829,900
13. 401(K) AND PROFIT SHARING PLAN
Effective January 1, 1992 the Board of Directors adopted a 401(k) Plan ("the
Plan") for its employees. Under the terms of the Plan, a participant may
contribute, on a pre-tax basis, up to twenty percent (20%) of compensation,
subject to IRS limitations. The Company may contribute to the Plan on behalf
of each participant. The Company's contribution is discretionary and depends
on the Company's profits and performance during the year.
At the same time, the Board of Directors adopted a Profit Sharing Plan for
its employees. The Company's contribution is discretionary and depends on the
Company's profits and performance during the year.
There were no contributions made by the Company to these Plans during the
years ended December 31, 1995 and 1994, the six months ended December 31,
1993 and the year ended June 30, 1993.
14. SIGNIFICANT CUSTOMERS
Sales through one distributor amounted to 24%, 24% and 15% during the year
ended December 31, 1994, the six months ended December 31, 1993 and the year
ended June 30, 1993, respectively.
15. SUBSEQUENT EVENTS
On February 1, 1996, the Company sold and licensed certain of the Company's
software and service bureau products to a former officer of the Company. The
purchase price is contingent and consists of royalty payments ranging from 5%
to 25% on sales of related products for two years, commencing on February 1,
1996, with no minimum or maximum amounts. Revenues related to these products
sold and licensed were $875,100, $722,200, $277,900, and $347,600 for the
years ended December 31, 1995 and 1994, the six months ended December 31,
1993 and the year ended June 30, 1993, respectively. The net book value of
the assets sold were not significant.
On April 30, 1996, the Company received the proceeds of $2,500,000 million of
senior debentures. The debentures will require interest only payments of
13.5% to April, 2001, when they are due. The debentures are secured by all
Company assets. In addition, the debenture holder was issued warrants to
purchase 1,247,582 shares of common stock at $0.01 per share. Proceeds from
this transaction are anticipated to be used to retire the note payable to
bank, to purchase capital equipment and for working capital.
The Company is in the process of raising $200,000 in Senior Subordinated
Promissory Notes. The notes would be due September, 1996, will bear interest
at 16% and will have initial common stock warrant coverage of 50%, using an
exercise price of 70% of the fair market value of the common stock 21 days
prior to funding. The warrant coverage increases 3% per week so long as the
notes remain outstanding, up to a maximum of 125%. As of April 30, 1996
$170,000 has been received by the Company.
REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
VISTA Information Solutions, Inc.
San Diego, California
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The consolidated
supplemental schedule II, valuation and qualifying accounts, is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not a part of the basic consolidated financial statements. This schedule has
been subjected to the auditing procedures applied in our audits of the basic
consolidated financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic consolidated financial statements
taken as a whole.
Our previous report on the 1995 financial statements, dated March 6, 1996,
except for the second and third paragraphs of Note 15, as to which the date was
April 10, 1996, included an explanatory paragraph that expressed substantial
doubt about the Company's ability to continue as a going concern. As explained
in Notes 5 and 15, the Company remedied a default under certain convertible
debentures and received the proceeds of $2.5 million of debt financing. Due to
these events, substantial doubt does not remain about the Company's ability to
continue as a going concern.
McGLADREY & PULLEN, LLP
Bloomington, Minnesota
March 6, 1996, except for Note 2, the last paragraph of Note 5 and the second
and third paragraphs of Note 15, as to which the date is April 30, 1996
VISTA INFORMATION SOLUTIONS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS (a) DEDUCTIONS (b) OF PERIOD
- ----------- --------- -------- ------------ -------------- ---------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Years ended December 31:
1995 $1,500 228,951 195,000 (176,951) $248,500
1994 $1,500 5,067 (5,067) $1,500
Six months ended December 31:
1993 $1,500 2,250 (2,250) $1,500
Year ended June 30:
1993 $1,500 150 (150) $1,500
</TABLE>
(a) Acquired on acquisition of VISTA Environmental Information, Inc.
(b) Accounts receivable written off
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Amendment No. 2 to the Company's Annual
Report on Form 10-K to be signed on its behalf by the undersigned, thereunto
duly authorized.
VISTA INFORMATION SOLUTIONS, INC.
Dated: June 26, 1996 By: /s/ Thomas R. Gay
Thomas R. Gay
Chief Executive Officer
VISTA INFORMATION SOLUTIONS, INC.
EXHIBIT INDEX TO ANNUAL REPORT
ON FORM 10-K
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Item No. Description Method of Filing
<S> <C> <C>
3.1 Restated Articles of Incorporation of the
Company, as amended to date.................... Incorporated by reference to the Company's Post Effective
Amendment No. 1 to Form SB-2 Registration Statement on Form
S-3 (File No. 33-72248).
3.2 Restated By-Laws of the Company, as amended to
date........................................... Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1993 (File No.
0-20312).
4.1 Specimen form of the Company's Common Stock
Certificate.................................... Incorporated by reference to the Company's Registration
Statement on Form 10 (File No. 0-20312).
4.2 Specimen form of the Company's Warrant
Certificate.................................... Incorporated by reference to the Company's Registration
Statement on Form 10 (File No. 0-20312).
4.3 Warrant Agreement.............................. Incorporated by reference to the Company's Registration
Statement on Form 10 (File No. 0-20312).
4.4 Certificate of Designation of the Rights and
Preferences of the Company's Series B Convertible
Preferred Stock................................ Incorporated by reference to the Company's Quarterly Report
on Form 10-QSB for the quarter ended September 30, 1993 (File
No. 0-20312).
4.5 Certificate of Designation of the Rights and
Preferences of the Company's Series C Convertible
Preferred Stock................................ Incorporated by reference to the Company's Current Report on
Form 8-K filed March 7, 1995 (File No. 0-20312).
4.6 Certificate of Designation of the Rights and
Preferences of the Company's Series D Convertible
Preferred Stock................................ Incorporated by reference to the Company's Current Report on
Form 8-K filed March 7, 1995 (File No. 0-20312).
4.7 Stock Purchase Agreement between Special
Situations Fund, L.P., Special Situations Cayman
Fund, L.P., and the Company dated August 9, 1993 Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1993 (File No.
0-20312).
4.8 Purchase Agreement by and among Paul S. Bachow
Co-Investment Fund, L.P., Paul S. Bachow and the
Company dated September 15, 1993............... Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1993 (File No.
0-20312).
4.9 Option Agreement by and among Paul S. Bachow
Co-Investment Fund, L.P., Paul S. Bachow and the
Company dated September 15, 1993............... Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1993 (File No.
0-20312).
4.10 Rockwin Corp. Warrant Certificate dated September
3, 1993........................................ Incorporated by reference to the Company's Registration
Statement on Form S-8 (File No. 33-73212).
4.11 Grant Warfield Option Agreement dated October 3,
1991........................................... Incorporated by reference to the Company's Registration
Statement on Form S-8 (File No. 33-73212).
4.12 Alex Tassos Warrant Agreements dated January 1,
1993 and April 19, 1993........................ Incorporated by reference to the Company's Registration
Statement on Form S-8 (File No. 33-73212).
4.13 James Hovis Warrant Agreement dated December 10,
1993........................................... Incorporated by reference to the Company's Registration
Statement on Form S-8 (File No. 33-73212).
4.14 Purchase Agreement dated February 28, 1995 among
the Company and certain investors identified in
the Agreement.................................. Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1994 (File No.
0-20312).
4.15 Standby Bridge Loan Facility dated January 15,
1994 between the Company and certain persons
listed on Exhibit A attached thereto........... Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1995 (File No.
0-20312).
4.16 Amendment to Subordinated Promissory Notes dated
February 28, 1995 between the Company and certain
persons listed on Exhibit A attached thereto... Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1995 (File No.
0-20312).
4.17 Form of Subordinated Convertible Debenture issued
from October through December 1995............. Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1995 (File No.
0-20312).
4.18 Form of Warrant issued in connection with the
Subordinated Convertible Debenture financing
issued from October through December 1995...... Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1995 (File No.
0-20312).
10.1 Employment Agreement of John L. Borowicz,
effective May 10, 1990, as amended............. Incorporated by reference to the Company's Registration
Statement on Form 10 (File No. 0-20312).
10.2 Employment Agreement of Thomas Foote-Lennox,
effective April 10, 1990, as amended........... Incorporated by reference to the Company's Registration
Statement on Form 10 (File No. 0-20312).
10.3 Geographic Underwriting System Agreement among
ISO Commercial Risk Services, Inc. and ISO
Telecommunications, Inc. and the Company, dated
June 3, 1991................................... Incorporated by reference to the Company's Registration
Statement on Form 10 (File No. 0-20312).
10.4 Supplement to Joint Service Agreement dated
February 5, 1996 between Insurance Services
Office, Inc. and the Company................... Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1995 (File No.
0-20312).
10.5 Office Building Lease by and between 7525
Mitchell Road Associates and the Company, dated
August 31, 1990................................ Incorporated by reference to the Company's Registration
Statement on Form 10 (File No. 0-20312).
10.6 Office Building Lease dated December 9, 1992 by
and between Governor Park Partners and the Company Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1995 (File No.
0-20312).
10.7 Lease dated November 30, 1995 by and between the
Company and Hankin Eagleview Associates........ Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1995 (File No.
0-20312).
10.8 Agreement of Lease dated June 24, 1992 by and
between the Company and Freemans Bridge Road
Associates..................................... Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1995 (File No.
0-20312).
10.9 1990 Stock Option Plan, as amended............. Incorporated by reference to the Company's Registration
Statement on Form S-8 (File No. 33-73212).
10.10 Profit Sharing Plan............................ Incorporated by reference to the Company's Registration
Statement on Form 10 (File No. 0-20312).
10.11 1995 Stock Incentive Plan...................... Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1995 (File No.
0-20312).
10.12 Settlement Agreement by and between Hewlett
Packard, Inc. and the Company, dated November 1,
1990........................................... Incorporated by reference to the Company's Registration
Statement on Form 10 (File No. 0-20312).
10.13 401(k) Plan.................................... Incorporated by reference to the Company's Registration
Statement on Form 10 (File No. 0-20312).
10.14 Employment Agreement of Donald R. Coley, dated
August 10, 1992................................ Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1993 (File No.
0-20312).
10.15 Employment Agreement of James E. Hovis, dated
December 10, 1992.............................. Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1993 (File No.
0-20312).
10.16 Commercial Loan Account Agreement and Promissory
Note between Marquette Bank Minneapolis and the
Company, dated February 28, 1993............... Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1993 (File No.
0-20312).
10.17 Geographic Underwriting System Joint Service
Agreement between Insurance Services Offices,
Inc. and the Company, dated October 1, 1992.... Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1993 (File No.
0-20312).
10.18 Distribution Agreement between Bankers Systems,
Inc. and the Company dated April 28, 1993...... Incorporated by reference to the Company's Annual
Report on Form 10-KSB for the fiscal year ended June
30, 1993 (File No. 0-20312).
10.19 Agreement for Services between Insurance Services
Office, Inc. and the Company dated August 28, 1992 Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1993 (File No.
0-20312).
10.20 Promissory Note between Richard P. Kiphart and
the Company dated March 2, 1993................ Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1993 (File No.
0-20312).
10.21 Addendum One to Geographic Underwriting System
Joint Service Agreement between Insurance
Services Offices, Inc. and the Company, dated
January 21, 1994............................... Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the transition period ended December 31, 1993
(File No. 0-20312).
10.22 Agreement and Plan of Merger between the Company,
DataMap Acquisition Corp. and VISTA Environmental
Information, Inc. dated January 23, 1995, without
exhibits....................................... Incorporated by reference to the Company's Current Report on
Form 8-K filed January 27, 1995 (File No. 0-20312).
10.23 Registration Rights Agreement dated February 27,
1995 among the Company and certain shareholders
of the Company................................. Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1994 (File No.
0-20312).
10.24 Amended and Restated Registration Agreement dated
February 28, 1995 among the Company, Paul S.
Bachow Co-Investment Fund, L.P. and Paul S. Bachow Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1994 (File No.
0-20312).
10.25 Registration Rights Agreement dated October 11,
1995 among the Company and certain persons and
entities listed on Schedule 1 attached thereto. Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1995 (File No.
0-20312).
10.26 Employment Agreement with Thomas R. Gay dated
February 28, 1995.............................. Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1994 (File No.
0-20312).
10.27 Employment Agreement with Anwar Bhimani dated
March 14, 1994................................. Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1994 (File No.
0-20312).
10.28 Letter Agreement dated November 16, 1994 related
to employment of Anwar Bhimani................. Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1994 (File No.
0-20312).
10.29 Employment Agreement with Gary S. Mertz dated
February 28, 1995.............................. Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1994 (File No.
0-20312).
10.30 1993 VISTA Stock Option Plan................... Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1995 (File No.
0-20312).
10.31 Agreement dated June 27, 1995 between the Company
and Silicon Valley Bank regarding factoring of
receivables.................................... Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ending June 30, 1995 (File No.
0-20312).
10.32 Factoring Modification Agreement dated November
21, 1995 between the Company and Silicon Valley
Financial Services............................. Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1995 (File No.
0-20312).
10.33 Factoring Modification Agreement dated February
1, 1996 between the Company and Silicon Valley
Financial Services............................. Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1995 (File No.
0-20312).
10.34 Agreement Regarding Board Observer dated April
18, 1995 between the Company and Century Capital
Partners, L.P.................................. Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ending September 30, 1995 (File
No. 0-20312).
10.35 Equipment Lease Agreement dated August 10, 1995
between the Company and Ally Capital Corporation Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1995 (File No.
0-20312).
10.36 Asset Purchase Agreement dated February 1, 1996
between the Company and Business Information
Technology Inc................................. Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1995 (File No.
0-20312).
10.37 Note dated February 13, 1996 between the Company
and TRW REDI Property Data..................... Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1995 (File No.
0-20312).
10.38 Loan documents for SIRROM Capital Corporation.. Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the period ending March 31, 1996. (File No. 0-20312)
21.1 List of subsidiaries of the Registrant......... Incorporated by reference to the Company's Annual Report on
Form 10-K for the period ending December 31, 1995 (File No.
0-20312).
23.1 Consent of Independent Auditors................ Filed herewith electronically.
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
VISTA Information Solutions, Inc.
San Diego, California
We consent to the incorporation by reference in the Registration Statement on
Form S-8 related to the 1990 Stock Option Plan, as amended and certain non-plan
options and warrants (commission file No. 33-73212) of our report, dated March
6, 1996, except for Note 2, the last paragraph of Note 5 and the second and
third paragraphs of Note 15, as to which the date is April 30, 1996, which
appears on page F-2 of the Annual Report on Form 10-K/A relating to the
consolidated financial statements of VISTA Information Solutions, Inc., for the
year ended December 31, 1995.
McGLADREY & PULLEN, LLP
Bloomington, Minnesota
June 24, 1996
