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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
AMENDMENT NO. 1 TO
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)
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(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
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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
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INDEX
PART I FINANCIAL INFORMATION PAGE
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION 3-7
SIGNATURES 8
EXHIBIT INDEX 9
2
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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).
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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 expense to 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.
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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 at least through 1998.
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. The increase in
accounts receivable from December 31, 1996 to September 30, 1997 is due
primarily to an increase in GUS receivables from ISO of approximately
$480,000, of this increase, $200,000 is attributable to an increase in GUS
revenue for the month ended September 30, 1997 compared to the month ended
December 31, 1996. In 1997, the Company experienced a slower rate of
collection for the remaining 280,000 of GUS receivables through September 30,
1997, principally as a result of an amendment (in March, 1997) to the Joint
Services Agreement with ISO which provides that a certain portion of
revenues, earned in accordance with generally accepted accounting principles,
was retained by ISO as of September 30, 1997 and paid to the Company in the
fourth quarter of 1997. The Company also experienced a somewhat slower rate
of collections of its non-GUS receivables, due to certain economic factors,
in the third quarter of 1997, which also contributed to the increase in
accounts receivable of approximately $300,000. In future periods the Company
expects that its collection of accounts receivable will more closely
approximate the historical results that had been reported prior to the first
nine months of 1997. During the nine months ended September 30, 1996,
proceeds from the SIRROM note payable were 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.
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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 at least through the end of 1998.
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
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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.
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SIGNATURES
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: February 11, 1998 By /S/E. STEVENS HAMILTON
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E. Stevens Hamilton
Chief Financial Officer
(Principal Financial Officer)
DATE: February 11, 1998 By /S/BRIAN DEAN CONN
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Brian Dean Conn
Controller
(Principal Accounting Officer)
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EXHIBIT INDEX
Exhibit
Number Description Location
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None.
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