<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
Or
[ ]TRANSITION REPORT UNDER 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)
DELAWARE 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.)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: Common Stock, $.001 par value,
17,337,135 shares outstanding on May 6, 1999.
Transitional Small Business Disclosure Format (check one) YES NO X
--- ---
1
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 3
1999 AND 1998 (UNAUDITED)
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1999 (UNAUDITED) AND 4,5
DECEMBER 31, 1998
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 6
1999 AND 1998 (UNAUDITED)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 7,8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 9-12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 13-14
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15
ITEM 5. OTHER INFORMATION 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 15
SIGNATURES 15
EXHIBIT INDEX 16
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues 6,228,014 6,233,182
Cost of revenues 1,238,985 1,342,418
------------------ -------------------
Gross margin 4,989,029 4,890,764
Operating Expenses
Sales and general and administrative 3,696,461 3,740,623
Research and development 299,022 346,695
Integration charges 1,309,303
Depreciation and amortization 894,701 613,102
------------------ -------------------
Operating income (loss) (1,210,458) 190,344
Interest income (expense) (178,017) (127,202)
Other income (expense) (5,727) (3,497)
------------------ -------------------
Net income (loss) (1,394,202) 59,645
Preferred stock dividends (150,000) (150,000)
Accretion of convertible preferred stock - (250,000)
------------------ -------------------
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS (1,544,202) (340,355)
------------------ -------------------
------------------ -------------------
Basic and diluted net income (loss) per common share (.10) (.03)
------------------ -------------------
------------------ -------------------
Weighted average common shares outstanding 15,786,764 10,394,671
------------------ -------------------
------------------ -------------------
</TABLE>
See Notes to Financial Statements
3
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
Assets 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash 106,808 475,863
Trade accounts receivable, less allowance for doubtful accounts of
$981,129 and $950,126, respectively 5,507,068 5,180,964
Note receivable - 2,500,000
Prepaid expenses and other assets 958,457 608,194
------------------ -------------------
TOTAL CURRENT ASSETS 6,572,333 8,765,021
EQUIPMENT, FURNITURE AND SOFTWARE, AT COST:
Equipment and furniture 6,442,367 6,351,059
Purchased software 2,793,917 2,676,064
------------------ -------------------
9,236,284 9,027,123
Less accumulated depreciation (5,529,347) (5,201,478)
------------------ -------------------
NET EQUIPMENT, FURNITURE AND SOFTWARE 3,706,937 3,825,645
ACQUIRED TECHNOLOGY AND ENVIRONMENTAL DATABASES
less accumulated amortization of $13,606,324 and $13,169,355,
respectively 9,378,269 8,452,290
DEPOSITS 376,343 340,171
------------------- --------------------
$20,033,882 $21,383,127
------------------- --------------------
------------------- --------------------
</TABLE>
4
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
Liabilities and Stockholders' Equity 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term obligations 3,561,948 3,204,601
Obligation to bank - 1,133,083
Line of credit 400,000
Accounts payable 1,548,129 1,735,271
Notes payable 76,019 -
Deferred revenue 348,810 323,521
Other current liabilities 1,520,211 1,841,584
------------------ --------------------
TOTAL CURRENT LIABILITIES 7,055,117 8,638,060
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES 547,289 581,522
STOCKHOLDERS' EQUITY:
Preferred stock, Series B convertible, par value $.001; liquidation value
$3,000,000, authorized 200,000 shares; 99,000 shares
issued and outstanding 99 200
Preferred stock, Series C convertible, par value $.001; liquidation
value $6,279,398, authorized 670,000 shares; 282,607 shares
issued and outstanding 283 371
Preferred stock, Series D convertible, par value $.001; liquidation
value $2,499,977, authorized 240,000 shares; 126,124 shares
issued and outstanding 126 187
Preferred stock, Series E convertible, par value $.001; liquidation
value $2,500,000, authorized, issued and outstanding 2,500
shares 3 3
Preferred stock, Series F convertible, par value $.001; liquidation
value $2,500,000, authorized issued and outstanding 2,500 shares 3 3
Common stock, par value $.001; authorized 43,000,000 shares; issued and
outstanding 1999; 16,622,315 and 1998; 11,952,329 16,622 11,952
Additional paid-in capital 51,748,032 49,846,742
Partners' capital 745,274 745,274
Accumulated deficit (40,078,966) (38,441,187)
------------------ --------------------
12,431,476 12,163,545
------------------ --------------------
$20,033,882 $21,383,127
------------------ --------------------
------------------ --------------------
</TABLE>
5
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, DECEMBER 31,
1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) (1,394,202) 59,645
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization 894,701 613,102
Changes in assets and liabilities:
Trade accounts receivable (326,104) (561,563)
Prepaid expenses (350,263) (71,136)
Trade accounts payable (187,142) 26,713
Accrued compensation and employee benefits (259,408) 30,843
Deferred revenue 25,289 (6,917)
Other current liabilities (61,965) (225,943)
-------------------- -------------------
NET CASH USED IN OPERATING ACTIVITIES (1,659,094) (135,256)
-------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and software (162,794) (326,856)
Increase in other assets (65,353) (20,266)
-------------------- -------------------
NET CASH USED IN INVESTING ACTIVITIES (228,147) (347,122)
-------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term obligations (112,124) (82,351)
Proceeds from long-term obligations 45,781 350,000
Payments on obligation to bank (1,133,083) -
Proceeds from note receivable for issuance of common stock 2,500,000 -
Stockholder distributions (93,577) (48,075)
Payments of preferred dividends (150,000) (150,000)
Proceeds from issuance of common stock 461,189 130,887
-------------------- -------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,518,186 200,461
-------------------- -------------------
DECREASE IN CASH AND CASH EQUIVALENTS (369,055) (281,917)
Cash and cash equivalents at beginning of period 475,863 596,424
-------------------- -------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 106,808 314,507
-------------------- -------------------
-------------------- -------------------
</TABLE>
6
<PAGE>
VISTA Information Solutions, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE
THREE MONTHS ENDED MARCH 31, 1999
(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, 1999 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, 1998, the Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1998, the Company's Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1998 and the Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1998.
The condensed consolidated financial statements of VISTA Information
Solutions, Inc. include the accounts of all majority-owned subsidiaries and
all significant intercompany amounts have been eliminated. The condensed
consolidated financial statements contained herein have been restated to give
retroactive effect to the merger acquisitions with GeoSure, LP ("GeoSure") on
January 14, 1999 and EcoSearch Environmental Resources, Inc. ("EcoSearch") on
March 1, 1999, both of which were accounted for as pooling-of-interests
business combinations (see discussion below).
REVERSE STOCK SPLIT AND REINCORPORATION
On January 27, 1998 the Company's Board of Directors approved a
reincorporation of the Company in Delaware and a one-for-two reverse stock
split of its Common Stock. On March 17, 1998, the Company's stockholders
approved the reincorporation and reverse stock split, which went into effect
after the close of the market on March 27, 1998. All references to common
shares, earnings (loss) per common share and conversion rates in the
consolidated financial statements and in these notes have been restated to
retroactively reflect the effect of the reverse split. In connection with the
reincorporation of the Company as a Delaware corporation the par value of the
common and preferred stock was changed to $.001 per share.
ACQUISITION OF GEOSURE, LP
On January 14, 1999, the Company merged with GeoSure, LP (GeoSure),
a company which provides environmental risk and due diligence information and
is a party to a 99-year license agreement with the Sanborn Company to
distribute Sanborn fire insurance maps, pursuant to the terms of a
Partnership Interest Purchase Agreement (the GeoSure Agreement). In exchange
for the partnership interests of GeoSure, the Company issued an aggregate of
2,590,000 shares of its common stock with 259,000 of such shares being
deposited into an escrow account in accordance with the terms of the GeoSure
Agreement. Under the terms of the license agreement, the Company may
distribute copies of historical fire insurance maps known as "Sanborn maps"
for a royalty fee equal to 30 percent of the Sanborn Company's prevailing
price. GeoSure, LP also owns all shares of National Research Center, LLC, a
provider of flood determination information and a majority interest in
National Research Center Insurance Services, Inc., a provider of flood
insurance services.
7
<PAGE>
ACQUISITION OF ECOSEARCH ENVIRONMENTAL RESOURCES, INC.
On March 1, 1999, the Company merged with EcoSearch Environmental
Resources, Inc. (EcoSearch), a national provider of environmental information
services, pursuant to the terms of a Stock Purchase Agreement (the EcoSearch
Agreement). In exchange for all the outstanding common stock of EcoSearch,
the Company issued an aggregate of 396,351 shares of its common stock with
39,635 of such shares being deposited into an escrow account in accordance
with the terms of the EcoSearch Agreement.
The mergers of GeoSure and EcoSearch have been accounted for under
the pooling-of-interests method of accounting and, accordingly, historical
financial data in this and future reports will be restated to include GeoSure
and EcoSearch data for all periods presented. The following unaudited pro
forma data summarizes the combined results of operations of the Company and
GeoSure and EcoSearch as though the mergers had occurred at the beginning of
each period and does not purport to be indicative of what would have occurred
had the acquisitions actually been effected as of such date or of results
which may occur in the future.
<TABLE>
<CAPTION>
(Unaudited)
(In 000's, except per share data) 1998
- -------------------------------------------------------------------------
<S> <C>
Revenues $25,423
Net loss attributable to common stockholders (4,291)
Basic and diluted loss per common share (.32)
- -------------------------------------------------------------------------
</TABLE>
8
<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 and the Annual Report on Form
10-KSB for the year ended December 31, 1998.
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. Words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates" and similar expressions
or variations of such words are intended to identify forward-looking
statements, but are not the exclusive means of identifying forward-looking
statements in this Report. Additionally, statements concerning future matters
such as the features, benefits and advantages of the Company's products, the
development of new products, enhancements or technologies, business and sales
strategies, competition and facilities needs and other statements regarding
matters that are not historical are forward-looking statements. Such
statements are subject to certain risks and uncertainties and 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. Readers are urged to review and consider
carefully the various disclosures made by the Company in this Report, which
attempts to advise interested parties of the risks and factors that may
affect the Company's business, financial condition and results of operations.
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."
On March 27, 1998, the Company's stockholders approved a
reincorporation and one-for-two reverse stock split. All references to common
shares, earnings (loss) per common share and conversion rates in the
accompanying financial statements and in these notes have been restated to
retroactively reflect the effect of the split.
9
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF THE PERIOD ENDED MARCH 31, 1999 TO THE PERIOD ENDED MARCH 31,
1998
Revenue
Total revenues decreased less than one percent from $6,233,000 for
the three months ended March 31, 1998, to $6,228,000 for the three months
ended March 31, 1999. Revenues from acquisitions that have been accounted for
as pooling-of-interests are as follows:
<TABLE>
<CAPTION>
1Q99 1Q98 CHANGE PERCENT
--------- --------- -------- -------
<S> <C> <C> <C> <C>
Revenues before acquisitions
Environmental Risk and Due Diligence Information Services 2,567,000 2,154,000 413,000 19%
Property Disclosure Information Services 808,000 0 808,000
Insurance Information Services (GUS) 1,048,000 1,463,000 (415,000) (28%)
--------- --------- -------- -----
Total revenues 4,423,000 3,617,000 806,000 22%
Revenues from acquisitions
GeoSure 1,350,000 2,327,000 (977,000) (42%)
EcoSearch 455,000 289,000 166,000 57%
--------- --------- -------- ----
Total revenues from acquisitions 1,805,000 2,616,000 (811,000) (31%)
Total revenue
Environmental Risk and Due Diligence Information Services 4,372,000 4,770,000 (398,000) (8%)
Property Disclosure Information Services 808,000 0 808,000
Insurance Information Services (GUS) 1,048,000 1,463,000 (415,000) (28%)
--------- --------- -------- -----
Total revenues 6,228,000 6,233,000 (5,000) -
</TABLE>
Increases in revenues from Environmental Risk and Due Diligence
Information Services prior to acquisitions were are primarily the result of
additional STARVIEW contracts, the acquisition of Entrac and an effort by the
Company to increase sales of products known as reference products. In 1997,
the Company initiated a campaign to convert existing transaction-based
business to longer term contractual relationships through the STARVIEW
desktop service. Initially, this lead to a reduction in revenue because of
lower overall pricing, but in 1998 the Company believes that it has overcome
this decrease through market share increases as a result of contractual
relationships.
Decreases in revenues acquired from GeoSure were primarily due to a
decline in loan securitization activity which began in the fourth quarter of
1998. The Company believes this decline has stabilized and will begin to
reverse in the third quarter of 1999. This statement is forward looking in
nature and subject to risks and uncertainties. Influencing factors include,
among other things, interest rate fluctuations, general economic conditions
and stock market performance. No assurances can be made that the
aforementioned decline will not continue and that revenues will increase.
On April 1, 1999 the Company converted all Environmental Risk and
Due Diligence Information Services business from the order and production
systems of GeoSure to VISTA's order and production systems. As a result,
Environmental Risk and Due Diligence Information Services revenue from the
GeoSure acquisition in future periods will not be distinguishable from other
revenue from this service line.
10
<PAGE>
Gross Margin
Gross margins increased two percent from approximately $4,891,000
for the three months ended March 31, 1998 to approximately $4,989,000 for the
three months ended March 31, 1999. Gross Margins as a percent of revenues
from acquisitions that have been accounted for as pooling-of-interests are as
follows:
<TABLE>
<CAPTION> 1Q99 1Q98
---- ----
<S> <C> <C>
Gross margins before acquisitions
Environmental Information Services 80% 72%
Property Disclosure Information Services 67%
Insurance Information Services 100% 100%
Total Gross margins before acquisitions 82% 83%
Gross margins from acquisitions
GeoSure (ERIIS) 71% 70%
GeoSure (NRC/NIS) 69% 70%
EcoSearch 87% 89%
Total Gross margins from acquisitions 74% 72%
Total Gross margins
Environmental Information Services 78% 72%
Property Disclosure Information Services 67%
Insurance Information Services 100% 100%
Total Gross margins 80% 78%
</TABLE>
Increases in gross margin percentages from Environmental Information
Services before acquisitions were primarily a result of the transition of
customers from the Company's traditional service bureau to the StarView
desktop service, which has lower costs of sales.
Operating Expenses
Total operating expenses increased 32 percent from $4,700,000 for
the three months ended March 31, 1998, to $6,199,000 for the three months
ended March 31, 1999. This increase is primarily the result of costs related
to the integration of acquired companies. These costs include severance
payments made to employees, prepayment penalties to lenders, travel, legal
and accountings costs. Increases in depreciation and amortization costs were
the result of amortization of acquired technology related to the acquisition
of E/Risk in July 1998.
Interest Expense
Interest expense increased 40 percent from $127,000 for the three
months ended March 31, 1998, to $178,000 for the three months ended March 31,
1999 due to an increase in overall debt levels of the Company.
The Company had no taxable income and, accordingly, recorded no net
provision for income taxes during the three months ended March 31, 1999 and
1998.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the three months ended
March 31, 1999 was approximately $1,659,000 compared to net cash used in
operating activities of approximately $135,000 during the three months ended
March 31, 1998. A net loss for the three months ended March 31, 1999 as
compared to net income for the same period in 1998 was the primary reason for
this decrease.
Net cash used in investing activities for the three months ended
March 31, 1999 was approximately $228,000 compared to $347,000 for the three
months ended March 31, 1998. The Company expects that investments in computer
and other technological equipment will remain steady during 1999 as it
continues with significant development projects. This statement is
forward-looking and is subject to risks and uncertainties including, but not
limited to, the Company's ability to fund these projects from operations or
to secure debt or equity financing.
Net cash provided by financing activities was approximately
$1,518,000 during the three months ended March 31, 1999, compared to $200,000
during the three months ended March 31, 1998. Proceeds from a note receivable
for the issuance of common stock netted against the repayment of an
obligation to a bank were the primary source of cash from financing
activities.
The Company entered into an agreement for a commercial credit
facility of $1,500,000 with Silicon Valley Bank. Borrowings under this
facility would bear interest at 0.5 percent above the Prime Lending Rate
published by Silicon Valley Bank. If the Company earns a positive net profit,
after taxes, for one quarter, the interest rate would be adjusted to 0.25
percent above the Prime Lending Rate. Borrowings under this agreement are
secured by substantially all the assets of the Company. The Company has made
no borrowings under this facility as of March 31, 1999.
The Company believes that the available borrowing facilities
discussed above will be sufficient to fund its operations through 1999.
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.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 28, 1998 the Company terminated a strategic alliance with
Phase One Inc. ("POI"). On August 19, 1998 POI filed a complaint against the
Company with the American Arbitration Association in San Diego, CA, alleging,
among other things, that the Company incorrectly terminated the alliance and
withheld revenue distributions from POI. The Company believes that these
claims have no merit and that any outcome of this arbitration would not have
a material impact on the Company's financial results or business condition.
This statement is forward-looking and subject to risks and uncertainties
inherent in any legal proceeding. Accordingly, no assurances can be given
that the outcome or the process of resolving the claims made in this
proceeding will not adversely affect the Company's financial results or
business condition.
In October 1998, the Company filed a complaint against ISO with the
American Arbitration Association alleging, among other things, that ISO has
incorrectly calculated processing fees from GUS transactions submitted
outside ISO's telecommunications network and withheld these fees from the
monthly GUS revenue distribution to the Company. An arbitrator has been
selected and the arbitration commenced April 15 and 16, 1999. Management and
its counsel believe that the Company is entitled to the withheld revenue
distributions in accordance with the relevant provisions of the ISO agreement
and, accordingly, the Company has recorded a receivable of approximately
$750,000 from ISO. This statement is forward-looking and subject to risks and
uncertainties inherent in any legal proceeding. While the Company believes it
will be awarded the withheld amounts, no assurances can be given that the
outcome or the process of resolving the claims made in this proceeding will
not adversely affect the Company's financial results or business condition.
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS REPORT, THE FOLLOWING
FACTORS (AS WELL AS OTHER FACTORS NOT LISTED) HAVE THE POTENTIAL TO
MATERIALLY AFFECT THE COMPANY'S FUTURE OPERATIONS.
COMPETITION. The Company's Environmental Risk and Due Diligence and
Property Disclosure Information Services operate in highly competitive
environments. The ability of competitors to gain market share from VISTA or
to drive down prices for these services may affect the operating margins and
overall profitability of the Company.
TECHNOLOGICAL CHANGE. The Company is dependent upon advanced
software development tools to maintain and upgrade its various database and
reporting systems. As currently popular operating systems and software
development tools are changed or replaced, the Company must continually
evaluate the need to migrate its existing applications to these systems and
respond accordingly. The ability to respond to these changes may affect the
performance, compatibility, level of support and market acceptance the
Company is able to achieve for its services. Furthermore, the cost of
maintaining and upgrading technological software and hardware may affect the
profitability and working capital of the Company. Failure to anticipate the
correct relative priorities of these projects would affect the Company's
operating results.
DEPENDENCE ON ISO FOR GUS REVENUES. The Company's 15-year agreement
with ISO grants them the exclusive sales and marketing rights for GUS
services. Sales of the Company's GUS product line, and a significant portion
of the Company's revenues and gross margin, are dependent upon ISO's ability
to penetrate this industry segment.
NEED TO INTEGRATE ACQUISITIONS. The Company has engaged in a number
of acquisitions and may continue to do so. Many of these acquisitions require
substantial integration with existing operations to realize their expected
returns on investment. Integration includes, among other things, absorption
of administrative functions that are eliminated from the acquired company,
combining sales and marketing activities with existing departments and
standardizing technological systems across business units. Failure to execute
business integrations successfully may result in increased costs, customer
attrition and decreases in revenue, and would have a material impact on the
operating results of the Company.
13
<PAGE>
YEAR 2000 COMPLIANCE.
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. Beginning in
the year 2000, these date codes fields will need to accept four digit entries
to distinguish 21st century dates from 20th century dates. As a result,
computer systems and/or software used by organizations may need to be
upgraded to comply with the "Y2K" requirements. There is significant
uncertainty in the software and information services industries concerning
the potential effects associated with such compliance. The Securities and
Exchange Commission has issued guidelines for disclosure of known and
potential risks of Y2K issues and of plans to minimize or mitigate those
risks.
STATE OF READINESS. The Company believes that the majority of its
software, networks and computer operating systems comply with Y2K readiness
standards. Certificates of Y2K compliance have been obtained from
manufacturers of certain software in use by the Company. The Company is
currently seeking such certificates from all manufacturers of software which
it expects could be affected by Y2K issues. Since the majority of its
computer hardware and other electronic equipment with embedded software have
been purchased during the past 18 months, the Company believes that such
equipment will not be impaired or disabled by Y2K issues. The Company has
obtained compliance certificates from substantially all manufacturers of this
type of equipment which reasonably could impact the Company's operations and
continues to seek compliance certificates from additional manufacturers. Lack
of readiness for Y2K issues on the part of suppliers, customers and other
third parties could materially impact the Company's ability to maintain
operations. In particular, the lack of readiness of Internet providers and
telecommunications companies could result in an interruption of its online
commerce system. The Company has obtained confirmation of the readiness of a
majority of third parties and continues to seek confirmation from other third
parties. The Company is in the process of formulating response plans in case
of interruptions of this nature and estimates it will have such plans in
place by the second quarter of 1999. This statement is forward-looking and
subject to risks and uncertainties. No assurances can be made regarding the
ability of the Company to formulate or execute any response plans.
COSTS TO ADDRESS Y2K ISSUES. The Company generally addresses Y2K
issues related to internally developed software as a part of its normal
software development and testing procedures. As such, costs previously
incurred to address these Y2K issues are not easily segregated. Purchased
software is normally replaced or updated within 18 months of the date
acquired and, as such, replacements or updates specifically for the purpose
of addressing Y2K issues are not distinguishable from ordinary replacements
or updates. For example, in 1998, the Company replaced its accounting
software with new software that is Y2K compliant. This replacement occurred
as part of the ordinary course of maintaining the Company's information
systems, not specifically to address the Y2K compatibility of the prior
system. The Company estimates that the costs incurred for evaluating and
addressing Y2K issues relating to its internal and commercial software and
hardware to be less than $250,000 and that future costs will not exceed
$750,000. This statement is forward-looking and subject to risks and
uncertainties. No assurances can be given that, if an effective readiness
plan can be designed and implemented, costs can be held to this level and
that sources of capital to fund such a project could be obtained. Costs to
address Y2K issues with third parties have not been estimated, though the
Company expects that a substantial portion of such costs would be borne by
the respective third parties.
RISKS OF Y2K ISSUES. The Company is not aware of any specific issues
which would have a material effect on its operations, liquidity or financial
condition, but can make projections of reasonably likely, "worst case"
scenarios which could have such an effect. An interruption of Internet or
telecommunications services for an extended period of time would prevent the
Company from providing service to a substantial portion of its customers,
resulting in a material loss of revenue. A protracted "crash" of the
Company's internal networking and operating software would also result in a
material loss of revenue as well as an interruption of research and
development activities. This scenario could also result in the inoperability
of the Company's financial systems which could hinder its ability to collect
revenue and comply with financial reporting requirements.
CONTINGENCY PLANS. The Company has not yet developed a formal
contingency plan to address Y2K issues but is currently evaluating backup
systems and alternative third party providers that may be required if the
actions and plans discussed above are not sufficient to prevent a material
effect on its operations.
14
<PAGE>
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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 16 of this Report.
b) Reports on Form 8-K.
The registrant filed a current report on Form 8-K dated January 29,
1999 which was amended on March 30, 1999. Under Item 2, the registrant
reported the acquisition of GeoSure, L.P.
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 14, 1999 By /s/ E. Stevens Hamilton
------------ ------------------------------
E. Stevens Hamilton
Chief Financial Officer
(Principal Financial Officer)
DATE: May 14, 1999 By /s/ Brian Dean Conn
------------- ------------------------------
Brian Dean Conn
Controller
(Principal Accounting Officer)
15
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Location
- ------- ----------- --------
<S> <C> <C>
27.1 Financial Data Schedule............... Filed electronically
</TABLE>
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 106,808
<SECURITIES> 0
<RECEIVABLES> 5,507,068
<ALLOWANCES> 981,129
<INVENTORY> 0
<CURRENT-ASSETS> 6,572,333
<PP&E> 9,236,284
<DEPRECIATION> 5,529,347
<TOTAL-ASSETS> 20,033,882
<CURRENT-LIABILITIES> 7,055,117
<BONDS> 0
0
514
<COMMON> 16,622
<OTHER-SE> 12,414,340
<TOTAL-LIABILITY-AND-EQUITY> 20,033,882
<SALES> 6,228,014
<TOTAL-REVENUES> 6,228,014
<CGS> 1,238,985
<TOTAL-COSTS> 7,438,472
<OTHER-EXPENSES> 183,744
<LOSS-PROVISION> 29,855
<INTEREST-EXPENSE> 178,017
<INCOME-PRETAX> (1,394,202)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,394,202)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,394,202)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
