<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 SEPTEMBER 30, 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 November 13, 1997 was 18,578,702.
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 AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
1996 (UNAUDITED) 3
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1997
(UNAUDITED) AND DECEMBER 31, 1996 4,5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 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 STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
- ---------------------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C>
REVENUES $2,650,453 $2,145,203 $7,212,673 $6,435,189
COST OF REVENUES 588,453 493,889 1,761,016 1,541,953
------------ ----------- ----------- ----------
GROSS MARGIN 2,062,000 1,651,314 5,451,657 4,893,236
OPERATING EXPENSES
Sales and general and administrative 1,756,869 1,775,548 4,569,490 5,080,241
Research and development 258,964 106,462 692,367 428,970
Depreciation and amortization 2,098,899 1,158,932 4,472,254 3,385,833
------------ ----------- ----------- ----------
OPERATING LOSS (2,052,732) (1,389,628) (4,282,454) (4,001,808)
Interest income (expense): (823,295) (77,464) (1,399,080) (339,021)
Other income (expense): (7,994) (18,809)
------------ ----------- ----------- ----------
NET LOSS ($2,884,021) ($1,467,092) (5,700,343) (4,340,829)
------------ ----------- ----------- ----------
------------ ----------- ----------- ----------
NET LOSS PER COMMON SHARE ($0.21) ($0.13) ($0.44) ($0.39)
------------ ----------- ----------- ----------
------------ ----------- ----------- ----------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 13,427,174 11,282,481 13,059,461 11,130,570
------------ ----------- ----------- ----------
------------ ----------- ----------- ----------
</TABLE>
See Notes to Financial Statements
3
<PAGE>
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
ASSETS 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $258,547 $56,277
Trade accounts receivable, less allowance
for doubtful accounts of
$307,651 and $284,000 respectively 1,999,765 1,211,933
Prepaid expenses & other assets 284,423 326,994
------------ ----------
TOTAL CURRENT ASSETS 2,542,735 1,595,204
EQUIPMENT, FURNITURE AND SOFTWARE, AT COST
Equipment and furniture $3,501,917 2,906,056
Purchased software 350,129 264,575
------------ ----------
3,852,046 3,170,631
Less accumulated depreciation and amortization (2,653,562) (2,160,506)
------------ ----------
NET EQUIPMENT, FURNITURE AND SOFTWARE 1,198,484 1,010,125
ACQUIRED TECHNOLOGY AND ENVIRONMENTAL DATABASES
less accumulated amortization of
$11,309,982 and $7,330,904 respectively 686,043 4,665,120
DEPOSITS 119,877 30,793
------------ ----------
$4,547,139 $7,301,242
------------ ----------
------------ ----------
</TABLE>
See Notes to Financial Statements
4
<PAGE>
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Note payable to bank -0- 601,316
Current maturities of long-term obligations 329,226 945,882
Trade accounts payable 917,644 979,949
Accrued development costs 487,500 487,500
Accrued compensation and employee benefits 127,325 182,139
Accrued interest -0- 404,700
Deferred revenue 148,248 122,000
Other current liabilities 87,291 117,310
------------ -----------
TOTAL CURRENT LIABILITIES 2,097,234 3,840,796
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES 404,705 2,948,640
------------ -----------
TOTAL LIABILITIES 2,501,939 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 4,807 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
Preferred stock, Series E convertible, par value $.01;
authorized 2,500 shares; 2,500 shares
issued and outstanding 25 -0-
Preferred stock, Series F convertible, par value $.01;
authorized 2,500 shares; 2,500 shares
issued and outstanding 25 -0-
Common stock, par value $.01; authorized
43,890,000 shares, issued and outstanding
17,072,525 and 12,285,651 shares, respectively 170,725 122,857
Additional paid-in capital 35,255,465 28,068,560
Accumulated deficit (33,389,718) (27,689,375)
------------ -----------
TOTAL STOCKHOLDERS' EQUITY 2,045,200 511,806
------------ -----------
$4,547,139 $7,301,242
------------ -----------
------------ -----------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1997 1996
- --------------------------------------------------------------------------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($5,700,343) ($4,340,829)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 3,492,062 3,385,833
Write-off of acquired technology 980,072 -0-
Amortization of SIRROM warrant value 644,756 55,769
Changes in current assets and liabilities
(Increase) decrease in:
Accounts receivable - trade (787,832) 402,293
Prepaid expenses & other assets 42,571 (299,488)
Increase (decrease) in:
Trade accounts payable (62,305) (358,903)
Accrued compensation and employee benefits (54,814) (267,924)
Accrued interest (48,355) -0-
Deferred revenue 26,248 -0-
Other current liabilities (30,019) (57,682)
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (1,497,959) (1,480,931)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and software (46,484) (113,266)
Increase in other assets (89,084) -0-
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (135,568) (113,266)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term obligations (219,226) (277,928)
Proceeds from long-term obligations 700,000 -0-
Payments on note payable to bank (601,316) (909,626)
Net proceeds from ISO note payable (338,942) 320,578
Proceeds from SIRROM note payable 300,000 2,341,857
Payments on SIRROM note payable (2,800,000) -0-
Net proceeds from the issuance of preferred stock 4,779,405 -0-
Proceeds from issuance of common stock 15,876 99,914
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,835,797 1,574,795
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 202,270 (19,402)
Cash and cash equivalents at beginning of period 56,277 21,027
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $258,547 $1,625
------------ ------------
------------ ------------
</TABLE>
6
<PAGE>
VISTA Information Solutions, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 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 and nine months ended
September 30, 1997 are not necessarily indicative of the operating results
that will be achieved for the year or any other period. These statements
should be read in conjunction with the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1996, the Company's Quarterly Report on Form
10-QSB for the quarter ended March 31, 1997 and the Company's Quarterly
Report on Form 10-QSB for the quarter ended June 30, 1997.
2. TERMINATION OF VISTAEXPRESS
In September 1997, the Company terminated its VISTAEXPRESS product
line, which was a proprietary on-line system originally acquired as a part of
the February 1995 acquisition of Vista Environmental Information, Inc.
Management assigned a value for the asset based on historical revenue gross
at the time of the acquisition. VISTAEXPRESS was terminated due to
management's decision to stop supporting the product after experiencing
increased maintenance costs and related technical difficulties in supporting
this verison of the product line during the third quarter. As a result of
this event, the Company wrote off the remaining book value of approximately
$980,000 during the third quarter.
3. SALE OF PREFERRED STOCK
On August 29, 1997, VISTA Information Solutions, Inc. (the
"Company") issued 2,500 shares of Series E Convertible Preferred Stock
("Series E") and 2,500 shares of Series F Convertible Preferred Stock
("Series F"), both with a par value of $0.01 per share, to Sirrom Capital
Corporation d/b/a Tandem Capital ("Sirrom") at a stated value and purchase
price of $1,000.00 per share for an aggregate gross purchase price of
$5,000,000.00. Sirrom shall be entitled to receive quarterly dividends of
$30.00 per share which will increase by $5.00 per share for each year after
August 31, 2002. Cumulative dividends in arrears on Series E and Series F
preferred stock, which have not been declared or paid, totaled $50,000 as of
September 30, 1997. Shares of Series E are convertible into the Company's
Common Stock at an initial conversion price of $2.75 per share. If the
Company does not successfully close a registered public offering of Common
stock in which, (i) the gross proceeds of the offering are at least
$15,000,000.00 and (ii) the offering price per share is greater that $4.00 (a
"Qualified Offering"), the conversion price shall be adjusted to $2.00 per
share. Shares of Series F shall be convertible into Common Stock on or after
the earlier of the closing of a Qualified Offering or July 1, 1998 at an
initial conversion price of (i) 75 percent of the offering price in a
successfully closed Qualified Offering or (ii) in the event the Qualified
Offering is not closed prior to July 1, 1998, 75 percent of the average
closing bid price for the Common Stock for the 20 consecutive trading days
prior to June 30, 1998. Series E stock may be redeemed, at the option of the
Company, at any time, provided the average closing bid price of the Company's
Common Stock for the 20 consecutive trading days preceding the date of the
redemption notice exceeds 200 percent of the Series E conversion price.
Series F stock may be redeemed, at the option of the Company, at any time on
or after June 30, 1998 provided the average closing bid price of the
Company's Common Stock for the 20 consecutive trading days preceding the date
of the redemption notice exceeds 200 percent of the Series F conversion
price. The Company has used approximately $2,800,000 of the proceeds to
retire the 1996 and 1997 Secured Promissory Notes to SIRROM Capital and
approximately $1,060,000 to retire the remaining balance of the Factoring
Loan Agreement with Silicon Valley Bank. Repayment of the SIRROM Promissory
Note caused the Company to accellerate the amortization of approximately
$548,000 of the remaining value of warrants issued in connection with the
Note.
4. NET LOSS PER COMMON SHARE
Net loss per Common Share is calculated by dividing net loss per
common share by the weighted average common shares outstanding during that
period, after deducting preferred dividend in arrears.
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. This discussion and
analysis contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934 and Section 27A of the Securities
Act of 1933, which are subject to the "safe harbor" created by that section.
The Company's actual future results could differ materially from those
projected in the forward-looking statements. The Company assumes no
obligation to update the forward-looking statements.
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. The VISTA Environmental product line 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."
RESULTS OF OPERATIONS
COMPARISON OF THE PERIODS ENDED SEPTEMBER 30, 1997 TO THE PERIODS ENDED
SEPTEMBER 30, 1996
Revenue
Total revenues increased 24 percent from $2,145,000 for the three months
ended September 30, 1996, to $2,650,000 for the three months ended September
30, 1997 and increased 12 percent from $6,435,000 for the nine months ended
September 30, 1996, to $7,213,000 for the nine months ended September 30,
1997. The third quarter increase resulted from an increase in GUS revenue of
$571,000 offset by decreases in environmental revenue of $66,000. The
increase in GUS revenue was attributed to the State Farm and Prudential
agreements. The year-to-date increase was also due to an increase in GUS
revenue of $1,229,000 offset by decreases in environmental revenue of
$451,000. Decreases in environmental revenue are 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
contractual relationships. This statement is forward looking and no
assurances can be made, however, that sufficient contracts can be signed to
achieve the necessary increase in market share.
Gross Margin
Gross margins increased from 76 percent of revenue for the three months
ended September 30, 1996, to 78 percent of revenue for the three months ended
September 30, 1997 and remained the same at 76 percent of revenue for the
nine months ended September 30, 1996 and the nine months ended September 30,
1997. A reclassification of costs associated with the Company's database
operation in Glenville, New York from sales, general and administrative to
costs of revenues of approximately $463,000 was offset by increases in
revenue from the GUS and StarView product lines (which have higher gross
margins).
8
<PAGE>
Operating Expenses
Total operating expenses increased 35 percent from $3,041,000 for the
three months ended September 30, 1996, to $4,115,000 for the three months
ended September 30, 1997 and increased 9 percent from $8,895,000 for the nine
months ended September 30, 1996 to $9,734,000 for the nine months ended
September 30, 1997. This increase is primarily the result of the write-off
of the VistaEXPRESS system in September 1997 of approximately $980,000.
Increased research and development costs associated with the StarView system
and Internet ordering system also contributed to the increase in operating
expense. The impact of these occurances on operating expense was partially
mitigated by a reclassification of costs associated with the Company's
database operation in Glenville, New York from sales, general and
administrative expenseto costs of revenues.
Interest Expense
Interest expense increased 963 percent from $77,000 for the three
months ended September 30, 1996, to $823,000 for the three months ended
September 30, 1997 and increased 313 percent from $339,000 for the nine
months ended September 30, 1996 to $1,399,000 for the nine months ended
September 30, 1997. This increase was primarily due to the accelerated
amortization of the warrant value related to the SIRROM Promissory Note and
related fees of approximately $650,000 following its retirement. Increased
borrowings under the Silicon Valley Bank factoring agreement compared to this
same period last year also accounted for a portion of the increase in
interest expense.
Future Contract Revenue
As discussed above, the Company has secured contracts with several of
its clients for the STARVIEW desktop reporting service. As of October 29,
1997 over 250 contracts had been signed with estimated annualized revenues of
approximately $4,600,000. This estimate is based on historical environmental
report activity for these clients. This estimate is forward-looking and
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 Prudential 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 State Farm. These
two contracts will generate approximately $200,000 and $5.5 million
respectively to the Company's GUS product line over the next three years.
This estimate is forward-looking and subject to risks and uncertainties.
Factors affecting this forward-looking information include the ability of the
Company to maintain the GUS database with accurate and current data and the
ability of ISO to enforce the terms of these contracts. No assurances can be
made that factors listed above will not significantly affect future revenues.
The Company had no taxable income and, accordingly, recorded no
provision for income taxes during the nine months ended September 30, 1997
and 1996.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company currently has negative cash flow from operations and has
been dependent on raising capital to fund continuing operations. As
discussed below, the Company believes it has raised sufficient capital in
1997 to fund its operations.
Net cash used in operating activities for the nine months ended
September 30, 1997 was approximately $1,498,000 compared to $1,481,000 during
the nine months ended September 30, 1996. Increases in accounts receivable
of approximately $788,000 during the nine months ended September 30, 1997
(compared to a decrease in accounts receivable of approximately $402,000
during the nine months ended September 30, 1996) was primarily attributed to
increased revenue from the GUS product line discussed above. During the nine
months ended September 30, 1996, proceeds from the SIRROM note payable
represented used to pay vendors and were a substantial portion of cash used
in operating activities during that period.
Net cash used in investing activities for the nine months ended
September 30, 1997 was approximately $136,000 compared to $113,000 for the
nine months ended September 30, 1996.
Net cash provided by financing activities was approximately $1,836,000
during the nine months ended September 30, 1997, compared to $1,575,000
during the nine months ended September 30, 1996. Borrowing transactions
discussed below were the primary sources of cash provided by financing
activities.
On August 29, 1997, VISTA Information Solutions, Inc. (the "Company")
issued 2,500 shares of Series E Convertible Preferred Stock ("Series E") and
2,500 shares of Series F Convertible Preferred Stock ("Series F"), both with
a par value of $0.01 per share, to Sirrom Capital Corporation d/b/a Tandem
Capital ("Sirrom) at a stated value and purchase price of $1,000.00 per share
for an aggregate gross purchase price of $5,000,000.00. Sirrom shall be
entitled to receive quarterly dividends of $30.00 per share which will
increase by $5.00 per share for each year after August 31, 2002. Shares of
Series E are convertible into the Company's Common Stock at an initial
conversion price of $2.75 per share. If the Company does not successfully
close a registered public offering of Common stock in which, (i) the gross
proceeds of the offering are at least $15,000,000.00 and (ii) the offering
price per share is greater that $4.00 (a "Qualified Offering"), the
conversion price shall be adjusted to $2.00 per share. Shares of Series F
shall be convertible into Common Stock on or after the earlier of the closing
of a Qualified Offering or July 1, 1998 at an initial conversion price of (i)
75 percent of the offering price in a successfully closed Qualified Offering
or (ii) in the event the Qualified Offering is not closed prior to July 1,
1998, 75 percent of the average closing bid price for the Common Stock for
the 20 consecutive trading days prior to June 30, 1998. Series E stock may be
redeemed, at the option of the Company, at any time, provided the average
closing bid price of the Company's Common Stock for the 20 consecutive
trading days preceding the date of the redemption notice exceeds 200 percent
of the Series E conversion price. Series F stock may be redeemed, at the
option of the Company, at any time on or after June 30, 1998 provided the
average closing bid price of the Company's Common Stock for the 20
consecutive trading days preceding the date of the redemption notice exceeds
200 percent of the Series F conversion price. The Company has used
approximately $2,800,000 of the proceeds to retire the 1996 and 1997 Secured
Promissory Notes to SIRROM Capital and approximately $1,060,000 to retire the
remaining balance of the Factoring Loan Agreement with Silicon Valley Bank.
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. During the nine months ended
September 30, 1997, the remaining debenture holders converted approximately
$325,000 of principal and accrued interest into common stock.
10
<PAGE>
The Company assumed $898,928 of convertible subordinated debentures in
the acquisition of VISTA Environmental. The debentures were 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. The Company
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 September 1997,
holders of all outstanding debentures elected to convert approximately
$1,248,000 of principal and accrued interest into common stock, which fully
retired these debentures.
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 March 6, 1997, repayment of the loan plus accrued interest
will be taken out of GUS revenue to the extent that it exceeds $135,000 per
month. As of September 30, 1997, the entire amount due under the ISO loan
had been repaid and the loan was retired.
The Company 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.
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 had been discounted by this amount and bore an effective interest of
26 percent. This note was secured by the tangible and intangible assets of
the Company. As discussed above, proceeds from the sale of Series E and
Series F Preferred Stock were used to retire the Promissory Note. As a
result of the retirement, the Company amortized the remaining value ascribed
to warrants issued to SIRROM in connection with the Promissory Notes.
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 were not
treated as a sale of receivables due to the existence of repurchase
obligations. The borrowings under this arrangement were collateralized by
certain assets of VISTA Environmental. The borrowing arrangement allowed the
Company to borrow up to 80 percent of eligible receivables up to a maximum of
$1,250,000. Proceeds from the loan bore interest at the rate of 1.5 percent
per month. There were additional administrative fees of 1 percent per month
charged by the lender based on the value of the receivables submitted for
borrowing. As discussed above, proceeds from the sale of Series E and Series
F Preferred Stock were used to retire the factoring agreement.
During 1997, the Company raised $1,000,000 in Senior Subordinated
Promissory Notes. The notes were due 12 months from the date executed, bore
interest at 16 percent and had 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 discussed above,
proceeds from the sale of Series E and Series F Preferred Stock were used to
pay the remaining $300,000 of unpaid principal to SIRROM Capital Corporation.
During the nine months ended September 30, 1997, principal and accrued
interest of approximately $731,000 was converted into approximately 842,000
shares of common stock, which fully retired the Secured Promissory Notes.
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
11
<PAGE>
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.
12
<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
On November 3, 1997, the Board of Directors for the Company elected
Robert Boscamp as a Member of the Board.
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 15 of this Report.
b) Reports on Form 8-K.
The registrant filed a current report on Form 8-K dated September 2,
1997. Under Item 5, the registrant reported the sale of Series E
and Series F Preferred Stock to Sirrom Capital Corporation d/b/a
Tandem Capital.
13
<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: November 14, 1997 By /S/E. STEVENS HAMILTON
----------------- -------------------------------
E. Stevens Hamilton
Chief Financial Officer
(Principal Financial Officer)
DATE: November 14, 1997 By /S/BRIAN DEAN CONN
----------------- -------------------------------
Brian Dean Conn
Controller
(Principal Accounting Officer)
14
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Location
- ------- ----------- --------
27.1 Financial Data Schedule Filed electronically
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 258,547
<SECURITIES> 0
<RECEIVABLES> 1,99,765
<ALLOWANCES> 307,651
<INVENTORY> 0
<CURRENT-ASSETS> 2,542,735
<PP&E> 3,501,917
<DEPRECIATION> 2,653,652
<TOTAL-ASSETS> 4,547,139
<CURRENT-LIABILITIES> 2,097,234
<BONDS> 0
0
8,728
<COMMON> 170,725
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,547,139
<SALES> 7,212,673
<TOTAL-REVENUES> 7,212,673
<CGS> 1,761,016
<TOTAL-COSTS> 1,761,016
<OTHER-EXPENSES> 9,734,111
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,399,080
<INCOME-PRETAX> (5,700,343)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,700,343)
<EPS-PRIMARY> (0.44)
<EPS-DILUTED> (0.18)
</TABLE>
