<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
or
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ____________.
COMMISSION FILE NO. 0-20312
------------------------
VISTA INFORMATION SOLUTIONS, INC.
(Exact name of small business issuer 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 office) Zip Code)
(619) 450-6100
(Issuer's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report.)
Indicate by check mark whether the Issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
The number of shares of the Issuer's Common Stock, $.01 par value, outstanding
on May 12, 1997 was 12,349,467.
Transitional Small Business Format (check one) YES NO X
--- ---
<PAGE>
INDEX
-----
PART I FINANCIAL INFORMATION PAGE
- ------ ----
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) 3
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1997 (UNAUDITED)
AND DECEMBER 31, 1996 4,5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) 6
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION 8-11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. 12
ITEM 2. CHANGES IN SECURITIES. 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 12
ITEM 5. OTHER INFORMATION. 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 12
SIGNATURES 13
EXHIBIT INDEX 14
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED
MARCH 31 MARCH 31
1997 1996
- --------------------------------------------------------------------------------
Revenues $1,935,953 $2,167,509
Cost of revenues 605,205 570,805
------------ -----------
GROSS MARGIN 1,330,748 1,596,704
OPERATING EXPENSES
Sales and general and administrative 1,375,340 1,575,626
Research and development 218,097 193,948
Depreciation and amortization 1,177,056 1,112,264
------------ -----------
OPERATING LOSS (1,439,745) (1,285,134)
Other income (expense):
Interest income (expense) (284,784) (119,312)
Other income (9,677)
------------ -----------
Net Loss ($1,734,206) ($1,404,446)
------------ -----------
------------ -----------
Net Loss Per Share ($0.15) ($0.13)
------------ -----------
------------ -----------
Weighted average common
shares outstanding 11,682,427 11,024,450
------------ -----------
------------ -----------
See Notes to Financial Statements
3
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
March 31 December 31
Assets 1997 1996
- --------------------------------------------------------------------------------
Current assets
Cash and cash equivalents $553 $56,277
Trade accounts receivable, less allowance
for doubtful accounts of
$ 245,767 and $ 238,156 respectively 1,310,665 1,211,933
Prepaid expenses & other assets 364,542 326,994
----------- -----------
TOTAL CURRENT ASSETS 1,552,760 1,595,204
Equipment, furniture and software, at cost
Equipment and furniture $3,258,235 2,906,056
Purchased software 272,261 264,575
----------- -----------
3,530,496 3,170,631
Less accumulated depreciation and amortization (2,337,774) (2,160,506)
----------- -----------
Net equipment, furniture and software 1,192,722 1,010,125
Capitalized software development costs,
less accumulated amortization of
$1,309,571 and $ 1,309,571 respectively 0 0
Acquired technology and environmental databases
less accumulated amortization of
$8,330,573 $ 7,330,904 respectively 3,665,451 4,665,120
DEPOSITS 47,748 30,793
----------- -----------
$6,581,681 $7,301,242
----------- -----------
----------- -----------
See Notes to Financial Statements
4
<PAGE>
<TABLE>
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
March 31 December 31
Liabilities and Stockholders' Equity 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Note payable to bank 820,623 601,316
Current maturities of long-term obligations 945,882
Trade accounts payable 1,004,653 979,949
Accrued development costs 487,500 487,500
Accrued compensation and employee benefits 161,868 182,139
Accrued interest 456,465 404,700
Deferred revenue 156,183 122,000
Other current liabilities 243,728 117,310
------------ ------------
TOTAL CURRENT LIABILITIES 3,208,020 3,840,796
Long-term obligations, less current maturities 4,469,310 2,948,640
------------ ------------
TOTAL LIABILITIES 7,677,330 6,789,436
Stockholders' Equity
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 $10,802,185,
authorized 670,000 shares; 643,935 shares
issued and outstanding 5,893 5,893
Preferred stock, Series D convertible, par value $.01;
liquidation value $2,499,982,
authorized 240,000 shares; 187,134 shares
issued and outstanding 1,871 1,871
Common stock, par value $.01; authorized
43,890,000 shares, issued and outstanding
11,856,096 and 10,989,800 shares, respectively 123,455 122,857
Additional paid-in capital 28,071,713 28,068,560
Accumulated deficit (29,423,581) (27,689,375)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (1,218,649) 511,806
------------ ------------
$6,581,681 $7,301,242
------------ ------------
------------ ------------
See Notes to Financial Statements
</TABLE>
5
<PAGE>
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
MARCH 31 MARCH 31
1997 1996
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($1,734,206) ($1,404,446)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 1,176,937 1,214,645
Other
Amortization of SIRROM warrant value 32,400
Changes in current assets and liabilities
(Increase) decrease in:
Accounts receivable - trade (98,732) (10,896)
Prepaid expenses & other assets (37,548) (59,453)
Increase (decrease) in:
Trade accounts payable 24,704 323,230
Accrued compensation and employee benefits (20,271) (139,571)
Accrued interest 51,765
Deferred revenue 34,183
Other current liabilities 126,418 (114,382)
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (444,350) (190,873)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and software (359,865) (224,115)
Additions to capitalized software development
costs 0
Decrease in other assets (16,955)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (376,820) (224,115)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term obligations (78,868)
Proceeds from long-term obligations 621,256 236,244
Net proceeds from note payable to bank 219,307 (35,113)
Net proceeds from ISO note payable 200,000
Proceeds from issuance of common stock 3,751 1,500
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 765,446 402,631
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (55,724) (12,357)
Cash and cash equivalents at beginning of
period 56,277 223,913
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $553 $211,556
------------ ------------
------------ ------------
6
<PAGE>
VISTA Information Solutions, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE
THREE MONTHS ENDED MARCH 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. In the opinion of management, the interim financial statements
include all adjustments (consisting of normal recurring accruals) necessary for
a fair presentation of the results for interim periods presented. Operating
results for the three months ended March 31, 1997 are not necessarily indicative
of the operating results that will be achieved for the year. These statements
should be read in conjunction with the Company's Annual Financial Report on Form
10-KSB for the year ended December 31, 1996.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis provides information that the
Company's management believes is relevant to an assessment and understanding of
the Company's results of operations and financial condition. This discussion
should be read in conjunction with the financial statements and footnotes which
appear elsewhere in this Report.
VISTA provides environmental risk information and address-based hazard and
classification information to bankers, engineers, insurance companies and
corporations throughout the United States. The Company, originally known as
DataMap, Inc. ("DMI"), was founded in 1975 to develop geographic-demographic
analysis tools for business ("GIS"). Supporting this business line, the Company
has developed a proprietary service known as the Geographic Underwriting System
("GUS-Registered Trademark-") which delivers address-based hazard and
classification information to property/casualty insurance underwriters. GUS
provides insurance underwriters and loss control groups of insurance companies
with on-line or batch access to a series of reports presenting specific
classification and hazard information about the property to be insured. The
Company's geo-demographic information databases, technological understanding and
techniques of geographic information processing provide the basis for its
current products. Additional insurance information layers can be added to the
Company's current GUS service offering due to the application's modular design.
On February 28, 1995, DMI acquired all the outstanding common stock of
VISTA Environmental Information, Inc. ("VISTA Environmental") in exchange for
newly issued common and preferred shares of DMI. The acquisition of VISTA
Environmental expanded the Company's existing product line to include
environmental risk information and significantly increased the marketing
capability within the Company. VISTA Environmental provides address and name
based environmental risk information about properties and companies in the
United States to bankers, engineers and corporations. On May 23, 1995, the
Company changed its name from DataMap, Inc. to "VISTA Information Solutions,
Inc."
8
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1997 TO THE THREE MONTHS ENDED
MARCH 31, 1996
Revenue
Total revenues decreased 11 percent from $2,168,000 for the three months
ended March 31, 1996, compared to $1,936,000 for the three months ended March
31, 1997. Environmental revenues for the three months ended March 31, 1997
decreased approximately 13 percent compared to the three month ended March 31,
1996. This decrease is primarily due to recent selling strategies which place a
lower emphasis on resale products, (which have lower gross margins) combined
with a campaign to convert existing transaction-based business to longer term
contract relationships through the STARVIEW desktop service. While this service
tends to reduce the revenue generated per transaction, the Company anticipates
that this effect will be mitigated if it is able to capture additional market
share as a result of contract relationships. No assurances can be made,
however, that sufficient contracts can be signed to achieve the necessary
increase in market share. GUS revenues for the three months ended March 31,
1997 increased 70 percent compared to the three months ended March 31, 1996.
The increase in GUS revenue was the result of increased marketing efforts by ISO
to sign contracts with significant insurance underwriters and the completion of
database layers within the GUS system.
Gross Margin
Gross margins decreased from 74 percent of revenue for the three months
ended March 31, 1996, to 69 percent of revenue for the three months ended
March 31, 1997. This increase is attributed to a reclassification of costs of
approximately $250,000 associated with the Company's database operation in
Glenville, New York. This increase was partially offset by decreases in other
costs of revenues resulting from a reduction in sales of resale products
discussed above and a proportional increase in GUS and STARVIEW revenue which
have a higher gross margin.
Operating Expenses
Operating expenses decreased 4 percent from $2,882,000 for the three months
ended March 31, 1996, to $2,770,000 for the three months ended March 31, 1997.
This decrease is due to the reclassification of database costs discussed above
partially offset by increases in depreciation and amortization as a result of
new equipment purchases and increases in research and development costs
associated with the STARVIEW system.
Interest Expense
Interest expense increased 139 percent from $119,000 for the three months
ended March 31, 1996, to $285,000 for the three months ended March 31, 1997.
This increase was primarily due to interest on the SIRROM loan discussed below
which generated approximately $117,000 of interest in the first quarter of 1997,
including approximately $38,000 of non-cash interest associated with the
amortization of the value of warrants issued with the loan.
Future Contract Revenue
As discussed above, the Company has secured contracts with several of its
clients for the STARVIEW desktop reporting service. As of May 12, 1997 over 90
contracts were signed with estimated annualized revenues of approximately
$1,800,000. This estimate is based on historical environmental report activity
for these clients. This estimate is a forward-looking statement subject to
risks and uncertainties. Factors affecting this forward-looking information
include the ability of STARVIEW clients to maintain previous levels of
environmental business, the willingness of clients to use the Company's service
exclusive of competitors' environmental reporting services, potential contract
cancellations or non-renewals of contracts expiring during the year. No
assurances can be made that this level of revenue can be achieved or that
factors listed above will not significantly affect future revenues.
In March 1997, ISO executed a one year contract with a major insurance
underwriter that has an approximate value of $800,000. In May 1997, ISO
executed a three year contract with a value of approximately $13 million with
another major insurance underwriter. These two contracts will generate
approximately $400,000 and $6.5 million respectively to the Company's GUS
product line.
9
<PAGE>
The Company had no taxable income and, accordingly, recorded no provision for
income taxes during the quarter or the three months ended March 31, 1997 and
1996.
The effect of inflation on the Company's results has not been significant.
LIQUIDITY AND CAPITAL RESOURCES
The Company currently has negative cash flow from operations and is dependent
on the raising of capital to fund continuing operations. As discussed below,
the Company anticipates raising sufficient capital in 1997 to fund its
operations.
Net cash used in operating activities for the three months ended March 31, 1997
was approximately $444,000 compared to $191,000 during the three months ended
March 31, 1996. This increase is primarily the result of a higher net loss for
the first quarter of 1997 compared with the first quarter of 1996.
Net cash used in investing activities for the three months ended March 31, 1997
was approximately $327,000 compared to $224,000 for the three months ended March
31, 1996. Increased computer and software purchases to support research and
development activities and to replace existing equipment were the primary cause
of this increase.
Net cash provided by financing activities was approximately $765,000 during the
three months ended March 31, 1997, compared to $403,000 during the three months
ended March 31, 1996. Borrowing under capital lease agreements and proceeds
from promissory notes discussed were the primary reasons for this increase.
In 1995, the Company received $446,000 from the sales of 16 percent subordinated
convertible debentures. During 1996, eight debenture holders elected to convert
their principal and accrued interest into common stock. These transactions
converted approximately $187,000 of debt and accrued interest into 276,000
shares of common stock.
The Company has outstanding $898,928 of convertible subordinated debentures
assumed in the acquisition of VISTA Environmental. The debentures are
convertible into Series C Preferred Stock ("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 74,000 shares of Series C
Preferred Stock and were due in January 1996. In January 1996, the Company did
not repay the debentures. As a result, under the terms of the debentures, the
repayment date was extended to January 1997 and the debenture holders received,
in aggregate, warrants for the purchase of 3,732 shares of Series C Preferred
Stock at $16.72 per share. In January, 1997, the Company had the option to
either pay these debentures off or extend them for another year and chose to
extend the debentures and issued warrants for the purchase of 4,135 shares of
Series C Preferred Stock at $16.72 per share.
In February 1996, 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 Company ultimately borrowed
$375,000, and repaid approximately $36,000. Under the agreement, the balance
bears interest at a rate of 1 percent per month on any outstanding amounts,
including accrued interest. Under a supplemental agreement, dated 3/6/97,
repayment of the loan plus accrued interest will be taken out of GUS revenue to
the extent that it exceeds $135,000 per month. The Company also has recorded a
liability to ISO for reimbursement of costs incurred by ISO for the development
of the Public Protection Classification (PPC) data layer of GUS in the amount of
$487,500 which represents the maximum amount VISTA could be responsible for
under the terms of the agreement with ISO. The actual amount due to ISO is
presently in dispute. According to a Supplemental Agreement to the Joint
Services Agreement, if no agreement was reached by November 15, 1996, VISTA and
ISO would begin arbitration. VISTA and ISO have agreed that the actual balance
will be determined through arbitration, but have not yet begun arbitration.
10
<PAGE>
On April 30, 1996, the Company entered into an agreement with the SIRROM Capital
Corporation for a $2,500,000 loan in the form of a 13.5 percent, five year,
interest only note with warrants to purchase 1,247,582 shares of Common Stock at
an exercise price of $0.01 per share with additional warrants to be issued for
the purchase of 497,776, 603,018 and 749,292 on the anniversary date of the loan
in years 3, 4 and 5 respectively. The Company assigned a value to the warrants
of $648,179 based on the fair market value of the warrants at the date of grant.
Accordingly, the note payable has been discounted by this amount and bears an
effective interest of 26 percent. This note is secured by the tangible and
intangible assets of the Company. Proceeds have been used to retire amounts
outstanding under the Company's previous factoring agreement and to pay down
existing payables.
The Company had an accounts receivable factoring agreement with Silicon Valley
Bank which was retired in April 1996, following receipt of funds under the
SIRROM loan. In September 1996, the Company entered into another factoring
agreement with the bank. 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 certain assets of VISTA
Environmental. The borrowing arrangement allows the Company to borrow up to 80
percent of eligible receivables up to a maximum of $1,250,000. Proceeds from the
loan bear interest at the rate of 1.5 percent per month. There are additional
administrative fees of 1 percent per month charged by the lender based on the
value of the receivables submitted for borrowing. The factoring agreement
provides for decreases in the interest rate if certain sales forecasts are
achieved.
The Company is in the process of raising approximately $1,000,000 in Senior
Subordinated Promissory Notes. The notes are due 12 months from the date
executed, will bear interest at 16 percent and will have initial common stock
warrant coverage of 100 percent, using an exercise price of 125 percent of the
fair market value of the common stock 21 business days prior to funding. As of
May 10, 1997, $300,000 has been received by the Company from members of its
Board of Directors and $300,000 from Sirrom Capital Corporation. The Company is
currently in the process of negotiating with a prospective lender for an
additional $400,000.
As reflected in the cash flow statement, the Company's operations currently do
not generate sufficient cash flows to meet the on-going cash needs of the
Company. The Company believes that the new financing transactions discussed
above will be sufficient to fund operations in 1997. Factors impacting this
forward looking information are the levels of the Company's overall revenues and
overhead expenses and changes in the Company's accounts receivable and accounts
payable turnover. If revenues do not increase as anticipated, the Company may
need to raise additional debt or equity financing to meet its operating capital
needs. In addition, the Company may need to raise additional capital in the
future to meet various strategic growth and research and development
initiatives. There can be no assurance that the Company will be able to obtain
any required additional funding on satisfactory terms, if at all. If the
additional funding is not obtained, the Company will seek alternative sources of
debt and/or equity financing and, to the extent necessary, will reduce overhead
expenditures.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
The exhibits to this Form 10-QSB are listed in the Exhibit Index on page 14
of this Report.
b) Reports on Form 8-K.
None
12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
VISTA INFORMATION SOLUTIONS, INC.
(REGISTRANT)
DATE: May 15, 1997 By /s/E. Stevens Hamilton
------------ ----------------------
E. Stevens Hamilton
Chief Financial Officer
(Principal Financial Officer)
DATE: May 15, 1997 By /s/Brian Dean Conn
------------- ------------------
Brian Dean Conn
Controller
(Principal Accounting Officer)
13
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description Location
- ------- ----------- --------
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 553
<SECURITIES> 0
<RECEIVABLES> 1,310,665
<ALLOWANCES> 245,767
<INVENTORY> 0
<CURRENT-ASSETS> 1,552,760
<PP&E> 3,258,235
<DEPRECIATION> 11,977,918
<TOTAL-ASSETS> 6,581,681
<CURRENT-LIABILITIES> 3,208,020
<BONDS> 0
0
976,400
<COMMON> 12,345,500
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,581,681
<SALES> 1,935,953
<TOTAL-REVENUES> 1,935,953
<CGS> 605,205
<TOTAL-COSTS> 605,205
<OTHER-EXPENSES> 3,064,954
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 284,784
<INCOME-PRETAX> 1,734,206
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,734,206
<EPS-PRIMARY> .15
<EPS-DILUTED> .08
</TABLE>
