<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
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)
DELAWARE 41-1293754
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5060 SHOREHAM PLACE, #300, SAN DIEGO, CA 92122
(Address of principal executive offices) (Zip Code)
(858) 450-6100
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(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,
25,160,790 shares outstanding on May 11, 2000.
Transitional Small Business Format (check one) YES NO X
--- ---
<PAGE>
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
- ------ ----
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 3
2000 (UNAUDITED) AND 1999 (UNAUDITED)
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2000 (UNAUDITED) AND DECEMBER 4-5
31, 1999
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 6-7
2000 (UNAUDITED) AND 1999 (UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 8-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 10-17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 17
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 17
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 16
ITEM 5. OTHER INFORMATION 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 16
SIGNATURES 18
EXHIBIT INDEX 19
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------
2000 1999
(UNAUDITED)
<S> <C> <C>
Net revenues $ 22,151 $ 6,228
Cost of revenues 12,866 1,239
---------------- ----------------
Gross margin 9,285 4,989
Operating expenses:
Selling, general and administrative 7,989 5,005
Research and development 471 299
Depreciation and amortization 1,054 347
Amortization of goodwill and acquired intangible assets 1,354 548
---------------- ----------------
Total operating expenses 10,868 6,199
---------------- ----------------
Operating loss (1,583) (1,210)
Interest expense, net (776) (178)
Other income (expense) (24) (6)
---------------- ----------------
Net loss (2,383) (1,394)
Preferred stock dividends declared (75) (150)
Accretion of convertible preferred stock dividends - -
---------------- ----------------
Net loss attributable to common stockholders $ (2,458) $ (1,544)
================ ================
Basic and diluted loss per common share $ (0.10) $ (0.10)
Weighted average common shares outstanding 25,132,389 15,786,764
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
3
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
-------------------- -------------------
ASSETS 2000 1999
(unaudited)
<S> <C> <C>
Current assets:
Cash $ 4,175 $ 5,105
Accounts receivable, net 9,640 10,230
Inventories 814 799
Other current assets 5,369 5,328
-------------------- -------------------
Total current assets 19,998 21,462
Property, equipment and software, net 10,402 10,610
Other acquired assets, net 15,801 16,750
Goodwill, net 22,052 22,236
Other assets, net 6,161 6,594
-------------------- -------------------
Total assets $ 74,414 $ 77,652
==================== ===================
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
4
<PAGE>
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEET - CONTINUED
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
-------------------- -------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
(UNAUDITED)
<S> <C> <C>
Current liabilities:
Current maturities of capital lease obligations $ 850 $ 827
Working capital note 7,486 7,404
Accounts payable 5,174 6,061
Deferred revenue 3,737 4,407
Other current liabilities 6,459 6,013
-------------------- -------------------
Total current liabilities 23,706 24,712
Deferred revenue, long-term portion 1,235 1,370
Capital lease obligations, less current maturities 662 735
Secured convertible note 17,010 16,762
-------------------- -------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, Series A, A-1 and A-2 convertible, par value $.001;
liquidation value $20,145; 807,564 shares authorized; 782,564 shares
issued and outstanding 1 1
Preferred stock, Series F convertible, par value $.001;
liquidation value $2,500; 2,500 shares authorized, issued and
outstanding - -
Preferred stock, undesignated series, 102,436 shares authorized; none issued - -
Common stock, par value $.001; 43,000,000 shares authorized; 25,166,330
shares issued and outstanding 25 25
Additional paid-in capital 89,160 88,974
Accumulated deficit (57,385) (54,927)
-------------------- -------------------
Total stockholders' equity 31,801 34,073
-------------------- -------------------
Total liabilities and stockholders' equity $ 74,414 $ 77,652
==================== ===================
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
5
<PAGE>
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
----------------- -----------------
2000 1999
(UNAUDITED)
<S> <C> <C>
Cash Flows from Operating Activities
Net loss $ (2,383) $ (1,394)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 1,054 347
Amortization of goodwill and acquired intangible assets 1,354 548
Amortization of discount on debt 330 -
Changes in assets and liabilities, net of effects of
business acquisitions:
Trade accounts receivable 590 (326)
Inventories (15) -
Prepaid expenses (171) (350)
Accounts payable (884) (187)
Deferred revenues (804) 25
Other current liabilities 547 (322)
-------------------- -----------------
Net cash used in operating activities (382) (1,659)
Cash Flows from Investing Activities
Decrease in lease receivables 387 -
Purchases of equipment, furniture and software (488) (163)
Net change in deposits and other assets 34 (36)
Increase in intangible assets (221) (29)
-------------------- -----------------
Net cash used in investing activities (288) (228)
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
6
<PAGE>
VISTA INFORMATION SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
------------------ ------------------
2000 1999
(UNAUDITED)
<S> <C> <C>
Cash Flows from Financing Activities
Principal payments on long-term obligations (249) (1,245)
Proceeds from long-term obligations - 46
Proceeds from exercise of stock options 64 461
Proceeds from note receivable for issuance of common stock - 2,500
Distributions to partners - (94)
Dividends on Series E and Series F Preferred Stock (75) (150)
---------------------------------------
Net cash (used in) provided by financing activities (260) 1,518
---------------------------------------
Net decrease in cash (930) (369)
Cash, beginning of year 5,105 476
---------------------------------------
Cash, end of quarter $ 4,175 $ 107
=======================================
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
7
<PAGE>
VISTA Information Solutions, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE
THREE MONTHS ENDED MARCH 31, 2000
(unaudited)
(in thousands, except share and per share data)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of VISTA Information
Solutions, Inc. (VISTAinfo or the Company) 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 only of normal, recurring adjustments) necessary for a
fair presentation of the results for interim periods presented. Operating
results for the three months ended March 31, 2000 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, 1999.
The consolidated financial statements of VISTA Information Solutions,
Inc. include the accounts of the Company and all majority-owned subsidiaries and
all significant intercompany accounts and transactions have been eliminated in
consolidation.
ACQUISITION OF GEOSURE, L.P.
On January 14, 1999, the Company exchanged 2,590,000 shares of the
Company's Common Stock, par value $0.001 per share, for all of the outstanding
partnership interests of GeoSure, L.P. (GeoSure) in a merger accounted for as a
pooling-of-interests. GeoSure 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. GeoSure also owns all of the
shares of National Research Center, LLC (NRC), a provider of flood determination
information, and a majority interest in National Research Center Insurance
Services, Inc. (NIS), a provider of flood insurance services.
ACQUISITION OF ECOSEARCH ENVIRONMENTAL RESOURCES, INC.
On March 1, 1999, the Company exchanged 396,351 shares of the Company's
common stock, par value $0.001 per share, for all of the outstanding common
stock of EcoSearch Environmental Resources, Inc. (EcoSearch). EcoSearch is a
national provider of environmental information services.
The transactions with GeoSure and EcoSearch have each been accounted
for as pooling-of-interests and, accordingly, the consolidated financial
statements for the periods presented have been restated to include the results
of operations and cash flows of GeoSure and EcoSearch.
ACQUISITION OF THE DATA MANAGEMENT DIVISION OF MOORE CORPORATION
LIMITED
On December 17, 1999, the Company acquired certain of the assets and
rights of the Data Management Services Division (DMS) of Moore Corporation Ltd.
and its subsidiary, Moore North America, Inc. (collectively "Moore") pursuant to
the terms of an Agreement for Purchase and Sale of Assets (the "Agreement"). DMS
provides technological solutions to the real estate industry including MLS
Boards, brokers, agents, individual consumers and market suppliers.
8
<PAGE>
In addition to the assumption of certain liabilities, the Company paid
to Moore an aggregate of (i) 950,000 shares of the Company's common stock, par
value $0.001 per share, (ii) a note payable in the principal amount of $18.7
million (the "Secured Convertible Note"), (iii) $20 million in cash and (iv) a
secured short-term working capital note payable (discussed below). Moore
retained the rights to certain trade accounts receivables and lease receivables
from U.S. obligors of the DMS business (the "Retained Receivables") in
conjunction with the working capital note payable as discussed below.
The Company and Moore entered into a Working Capital Note (the "Working
Capital Note"), pursuant to which Moore agreed to loan the Company the proceeds
from the collection of the Retained Receivables, up to a maximum of $7.5
million. The Working Capital Note bore interest at the prime rate plus 1% with
interest payable monthly in arrears beginning February 1, 2000. All amounts
outstanding on this Working Capital Note were due on April 26, 2000, as amended.
If all of the Retained Receivables had not been fully collected by Moore by
April 26, 2000, the Company was to pay Moore any deficiency if the collections,
less costs of collection, were less than $7.5 million and Moore was to pay the
Company any excess if collections, less costs of collection, were more than $7.5
million. Due to the repurchase obligation by the Company of any remaining
Retained Receivables on April 26, 2000, the Company recorded the aggregate value
of the Retained Receivables of $7.5 million and the corresponding Working
Capital Note of $7.5 million as of the acquisition date. As of May 8, 2000, the
Working Capital Note had been in full with the proceeds from the financing from
PNC Bank as discussed below.
2. LOAN FROM PNC BANK
On May 8, 2000, the Company entered into a credit agreement with PNC
Bank to borrow up to $10 million. Borrowing availability under this agreement is
based on the amount of eligible accounts receivable and cash flow from lease
receivables. Borrowings bear interest at a rate equal to the Eurodollar rate and
are due to be repaid on the earlier of the maturity date of the Secured
Convertible Note or April 17, 2003. Proceeds from this loan have been used to
retire the existing Working Capital Note from Moore.
9
<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 Company's Annual Report on Form 10-KSB
for the year ended December 31, 1999.
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 those sections. 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 discussed at the end of this section and the
Company's actual future results could differ materially from those projected in
the forward-looking statements as a result of several factors, including the
business risks discussed below. 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. These risks are also
discussed in more detail in the Company's report on Form 10-KSB for the year
ended December 31, 1999.
VISTAinfo provides information for making real-estate decisions to
professionals and consumers throughout the United States and Canada.
Effective December 17, 1999, the Company acquired the assets of Moore Data
Management Services (the "DMS acquisition"). Subsequently, as of February
2000, the Company was reorganized into three operating units: RE/Commercial,
RE/Professional and RE/Consumer. RE/Commercial provides environmental risk
information to banks, engineers and consultants, flood information to banks,
and insurance risk information to property and casualty insurance
underwriters. RE/Professional provides software solutions, disclosure
information and data management services to the real estate industry and home
sellers. RE/Consumer provides property listing, risk and other information to
potential home buyers through its network of internet sites.
The Company, originally known as DataMap, Inc. ("DMI"), was founded in
1975 to develop geographic-demographic analysis tools and data for businesses.
The Company focused its initial selling efforts for its database services on the
insurance industry through a joint services arrangement with the Insurance
Services Office, Inc. (ISO). In 1995, the Company changed its name from DataMap,
Inc. to VISTA Information Solutions, Inc. after acquiring, through a
wholly-owned subsidiary, VISTA Environmental Information, Inc. Since 1995,
VISTAinfo has expanded its information assets and marketing channels through a
series of acquisitions discussed below.
The Company was incorporated under the laws of the State of Minnesota
in 1975. On March 27, 1998 the Company was reincorporated in the State of
Delaware concurrent with a one-for-two reverse stock split, pursuant to which
each two outstanding shares of the Company's Common Stock were converted into
one share of Common Stock. In connection with the reincorporation, the par value
of the Company's common and preferred stock was changed to $0.001 per share.
10
<PAGE>
RESULTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2000 TO THE THREE
MONTHS ENDED MARCH 31, 1999
REVENUES
Total revenues increased 256 percent from $6,228 for the three months
ended March 31, 1999, to $22,151 for the three months ended March 31, 2000. This
increase was primarily the result of the DMS acquisition in December 1999.
During the three months ended March 31, 2000, revenues from the DMS business
amounted to $16,050 or 75 percent of total revenues for the quarter. Non-DMS
revenues for the first quarter of 2000 were $6,100 compared to 6,228 in the
first quarter of 1999.
Revenue during the first quarter of 2000 for the RE/Commercial,
RE/Consumer and RE/Professional divisions were $5,177, $154 and $16,820
respectively.
GROSS MARGIN
Gross margin during the first quarter of 2000 increased 86 percent
from $4,989 for the three months ended March 31, 1999 to $9,285 for the three
months ended March 31, 2000. Gross margin as a percentage of revenue decrease
from 80 percent of revenue for the three months ended March 31, 1999 to 42
percent of revenue for the three months ended March 31, 2000. This increase
in gross margin amounts and the decrease in the gross margin rate were
attributable to the higher revenues and lower gross margin rates from the DMS
acquisition. Gross margin rates on DMS and non-DMS revenue were 28 percent
and 79 percent respectively.
Gross margins during the first quarter of 2000 for the
RE/Commercial, RE/Consumer and RE/Professional divisions were $4,175, $(125)
and $5,235 respectively with gross margin rates of 81 percent, (81) percent
and 31 percent respectively.
OPERATING EXPENSES
Operating expenses during the first quarter of 2000 increased 75
percent from $6,199 for the three months ended March 31, 1999 to $10,868 for
the three months ended March 31, 2000. This increase was attributable to
expenses associated with the DMS operations which amounted to $5,501 in the
first quarter of 2000. Non-DMS operating expenses decreased 7 percent, from
$6,199 to $5,766 for the first quarters of 1999 and 2000, respectively. This
decrease resulted from reduced expenses from the amortization of acquired
intangible assets.
Operating expenses during the first quarter of 2000, excluding
depreciation and amortization, for the RE/Commercial, RE/Consumer and
RE/Professional divisions were $2,749, $150 and $3,641 respectively.
INTEREST EXPENSE
Interest expense increased 336 percent from $178 for the three
months ended March 31, 1999 to $776 for the three months ended March 31,
2000. In December 1999, the Company borrowed $18,700 in the form of a
Subordinated Convertible Note Payable and $7,500 in the form of a Working
Capital Note from Moore Corporation Limited in connection with the DMS
acquisition. Interest expense for the first quarter of 2000 attributable to
the Subordinated Convertible Note Payable and the Working Capital Note was
$565 and $159 respectively.
The Company had no taxable income and, accordingly, recorded no
provision for income taxes during the three months ended March 31, 2000 or
March 31, 1999.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the three months ended March
31, 2000 was $382 compared to net cash used in operating activities of $1,659
during the three months ended March 31, 1999. This decrease was primarily the
result of increased collections of accounts receivable.
Net cash used in investing activities for the three months ended March
31, 2000 was $288 compared to $228 for the three months ended March 31, 1999.
The Company expects that investments in capitalized software development and
equipment will increase in 2000 as it integrates and improves its various
systems. 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 used in financing activities was approximately $260 during the
three months ended March 31, 2000, compared to $1,518 net cash provided by
financing activities during the three months ended March 31, 1999. In January
1999, the Company received $2,500 from the payment of a note receivable issued
in connection with a private placement of Common Stock.
In May 2000, the Company entered into a credit agreement with PNC Bank
to borrow up to $10 million. Borrowing availability under this agreement is
based on the amount of eligible accounts receivable and cash flow from lease
receivables. Borrowings bear interest at a rate equal to the Eurodollar rate and
are due to be repaid on the earlier of the maturity date of the Moore
Subordinated Convertible Note Payable or April 17, 2003. Proceeds from this loan
have been used to retire the existing working capital loan from Moore.
The Company believes that the available borrowing facilities
discussed above will be sufficient to fund its operations through 2000.
Factors impacting this forward-looking statement are the levels of the
Company's overall revenues and overhead expenses, changes in the Company's
accounts receivable and accounts payable turnover, the costs incurred to
acquire and integrate desired acquisitions and the financial conditions of
acquired businesses. If revenues do not meet expectations, 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, acquisition and research and
development initiatives, as well as required, payments on outstanding
indebtedness. 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 or defer or cancel certain initiatives.
12
<PAGE>
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.
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,
losses of key personnel and decreases in revenue, and would have a material
impact on the operating results of the Company.
THE COMPANY HAS SUSTAINED LOSSES IN THE PAST AND THE COMPANY MAY SUSTAIN LOSSES
IN THE FUTURE.
The Company has experienced operating losses during the three months ended
March 31, 2000 and during the year ended December 31, 1999. The Company's
cumulative losses as of March 31, 2000 were approximately $57 million. The
Company may not be able to achieve or maintain profitable operations and
generate positive cash flows.
THE COMPANY'S OPERATING RESULTS MAY VARY SIGNIFICANTLY FROM QUARTER TO
QUARTER.
The Company's future operating results may fluctuate from quarter to
quarter or year to year. The Company's revenues, on a quarterly basis, can be
affected by the timing and extent of the Company's own sales and marketing
activities, competitive conditions and economic factors that affect the level of
transactions in which the Company's products and services are used. In addition,
expenses associated with acquiring data, maintaining and improving existing
products and developing new products, sales campaigns and other unforeseen costs
will also affect operating results.
THE COMPANY MAY NOT BE ABLE TO SUCCESSFULLY COMPETE IN THE HIGHLY
COMPETITIVE ENVIRONMENTAL AND GEOGRAPHIC INFORMATION SYSTEMS
MARKET.
Technological advances in computer software and hardware have reduced the
barriers to entry into the environmental and the geographic information systems
industries in which the Company competes. In particular, the rapid expansion of
the Internet creates a substantial new channel for distributing geographic
information to the market, and a new avenue for future entrants to the
environmental information industry. The Company may not be successful using this
new channel. The Company's markets are highly competitive and many of the
Company's potential competitors have substantially greater capital resources,
research and development capabilities, and marketing resources and experience
than the Company, particularly with respect to geographic information systems.
The Company's products and services may not be widely accepted in the commercial
marketplace. Competitive factors may reduce revenues or margins, which could
have a material adverse effect on the Company and the Company's operating
results and financial condition.
13
<PAGE>
IN ORDER TO COMPETE EFFECTIVELY IN THE ENVIRONMENTAL AND GEOGRAPHIC
INFORMATION SYSTEMS MARKET THE COMPANY NEEDS TO DEVELOP NEW TECHNOLOGIES AND
PRODUCTS THAT ARE ACCEPTABLE TO THE COMPANY'S CUSTOMERS.
The market for the Company's products is characterized by rapidly changing
technology, evolving industry standards and frequent new product introductions.
The Company's success will depend to a substantial degree upon the Company's
ability to develop and introduce in a timely fashion enhancements to the its
existing products and new products that meet changing customer requirements and
emerging industry standards. The development of new, technologically advanced
products is a complex and uncertain process requiring high levels of innovation,
as well as the accurate anticipation of technological and market trends. The
Company may not be able to identify, develop, produce, market or support new
products successfully, such new products may not gain market acceptance and the
Company may not be able to respond effectively to technological changes,
emerging industry standards or product announcements by competitors. The Company
may not be able to introduce product enhancements or new products on a timely
basis. Furthermore, from time to time, the Company may announce new products,
capabilities or technologies that have the potential to replace or shorten the
life cycle of existing product offerings. Announcements of product enhancements
or new product offerings could cause customers to defer purchasing the Company's
existing products. Failure to introduce new products or product enhancements
effectively and on a timely basis, customer delays in purchasing products in
anticipation of new product introductions and any inability to respond
effectively to technological changes, emerging industry standards or product
announcements by competitors could have a material adverse effect on the
Company's business, operating results and financial condition.
THE COMPANY'S PRODUCTS MAY HAVE DEFECTS THAT THE COMPANY CAN NEITHER DETECT
NOR, ONCE DETECTED, CORRECT.
Complex software systems may contain undetected errors when first
introduced or as new versions are released. Errors may be found in new or
enhanced products after delivery of reports. Moreover, any software errors may
not be corrected or correctable in a timely manner, if at all. The occurrence of
software errors, as well as any delay in correcting them, could result in the
delay or loss of market acceptance of the Company's products, additional
warranty expense, diversion of technical and other resources from the Company's
product development efforts or the loss of credibility with ISO, VARs and other
resellers. Any of these factors could have a material adverse effect on the
Company's business, operating results and financial condition.
THE COMPANY'S PRODUCT COULD CREATE A SIGNIFICANT LIABILITY FOR THE
COMPANY.
The Company provides information to the insurance, financial and
engineering industries. These customers generally rely upon this information to
assess the risk or scope of work involved in a transaction or contract. An error
or omission in the information the Company provides could have an adverse
financial impact on customers. The Company may be held liable for damages if
such an error or omission occurs and it may have an adverse effect on the
operating results and financial condition of the Company. While the Company
maintains insurance coverage against errors and omissions, that coverage may be
inadequate to insure against all potential claims and the coverage may not
remain available on economically reasonable terms.
ACCESS TO FREE INFORMATION ON THE INTERNET COULD AFFECT THE MARKETABILITY OF THE
COMPANY'S SERVICES AND ITS CUSTOMERS' SERVICES.
The Company's MLS Systems customers provide real estate listing
information to real estate brokers and agents who use this information to market
and search for real estate properties for their clients. A number of Internet
services (including Cyberhomes) provide free listing information directly to
consumers at little or no cost. These services generally contract with MLS's for
this property data or accept listed property information directly from the home
seller. If this new information medium develops in a way that causes sellers and
purchasers to tend to require fewer services from brokers and agents, fee
revenue from real estate professionals to MLS's could be adversely impacted.
This could adversely affect the value of the Company's contracts with MLS's and
the Company's revenues and gross margins.
14
<PAGE>
The emergence of the Internet as a source for public information presents
a challenge to information providers to find new sources of revenue. Failure to
take the correct action in response to these changes could result in the loss of
existing revenue sources and future opportunities for new revenues.
DEMAND FOR THE COMPANY'S PRODUCTS MAY DECREASE IF REGULATIONS CHANGE.
The demand for the Company's environmental compliance products arises
primarily as a result of cleanup liability and other governmental regulations in
the environmental area. Demand for the Company's Property Disclosure Information
Services depends on existing California law regarding disclosures by home
sellers. The current laws or regulations may change and subsequently the need
for the Company's products may decrease. Any changes in the regulatory
environment, which affect enforcement procedures or the need for reporting,
could have a material adverse effect on the Company's revenues.
MAINTAINING THE COMPANY'S DATABASES AND UPGRADING THE COMPANY'S
SOFTWARE IS VERY COSTLY.
The Company has proprietary software and databases that may require
extensive maintenance and updating to remain current and to provide new and
additional layers of information to users of the Company's products and
services. The addition of a new layer of information to the Company's databases
and the maintenance and updating of existing layers of information may be costly
or difficult and delay the Company's ability to achieve and maintain profitable
operations in the future. The Company may be required to make significant
ongoing investments for its products and services to achieve commercial
acceptance in the marketplace and to remain competitive.
THE COMPANY'S INTELLECTUAL PROPERTY MAY BE INADEQUATELY PROTECTED.
The Company's future success depends, in large part, upon
the Company's proprietary technology. Although the Company believes that the
database design and data encoding methodologies may have potential for software
patent protection, to date it does not hold any patents, has made no patent
applications, and currently relies on a combination of contractual rights, both
registered and unregistered trade and service marks and other copyright laws to
establish and protect the its proprietary rights. The steps the Company has
taken to protect intellectual property may be inadequate to prevent
misappropriation of its technology. Also, the Company's competitors may
independently develop technologies that are substantially equivalent or superior
to the existing technology. In the event that protective measures are not
successful, the Company's business, operating results and financial condition
could be materially and adversely affected. The Company is also subject to the
risk of adverse claims and litigation alleging infringement of intellectual
property rights of others. Third parties may assert infringement claims in the
future with respect to the Company's current or future products and any such
claims may result in litigation, regardless of the merits of such claims. Any
necessary licenses may not be available and, if available, such licenses may not
be obtained on commercially reasonable terms. Any litigation with respect to
intellectual property claims could be extremely expensive and time consuming and
could have a material adverse effect on the Company's business, operating
results and financial condition, regardless of the outcome of such litigation.
THE HOLDERS OF THE COMPANY'S PREFERRED STOCK HAVE SUPERIOR RIGHTS
AND PREFERENCES.
The Company has outstanding 102,564 shares of the Company's Series A
Preferred, 380,000 shares of Series A-1 Preferred, 300,000 shares of Series A-2
Preferred and 2,500 shares of Series F Preferred, all of which provide the
holders of such shares with rights and preferences superior to those of holders
of the Company's common stock. The holders of these series of preferred stock
are, or may be entitled to, dividends and distributions payable with respect to
the number of shares of common stock into which the preferred stock is
convertible, and would be entitled to receive such dividends or distributions
prior to payment of any such dividends or distributions to the holders of common
stock. The holders of preferred stock are also entitled to preferential payment
in the event that the Company is liquidated. The Company must obtain the consent
of the preferred shareholders as one or separate classes prior to certain
events. These superior rights and preferences could adversely affect the holders
of shares of the Company's common stock.
THE COMPANY MAY NOT BE ABLE TO RETAIN KEY TECHNICAL AND MANAGEMENT
PERSONNEL.
The Company's future success is highly dependent on the continued
performance of the Company's key management and technical personnel. There is a
high demand for skilled personnel, specifically in the software
15
<PAGE>
development and information technology professions. The loss of the services of
any of the Company's key employees could have an adverse effect. The Company
does not maintain key-man life insurance policies with respect to the Company's
key management or personnel. Furthermore, changes in existing technology or
customer demand for alternate technologies could create the need for additional
technical personnel. The Company's future success will also depend in part upon
the Company's ability to attract and retain additional highly qualified
management, technical and marketing personnel.
THE LOSS OF SIGNIFICANT CUSTOMERS WILL ADVERSELY IMPACT THE COMPANY'S
OPERATIONS.
The majority of revenue from the GUS product comes indirectly from a
significant contract by ISO with State Farm through the Company's joint services
relationship with ISO. An unexpected termination of this contract with ISO would
adversely impact the Company's operating results and financial condition.
Additionally, a significant portion of revenue from the Company's MLS Systems
line is derived from relatively few large contracts. The termination or
non-renewal of some of these contracts would adversely impact the Company's
operating results and financial condition.
THE COMPANY MAY NOT BE ABLE TO FULLY UTILIZE TAX ADVANTAGES.
As of December 31, 1999, the Company had federal and state net operating loss
carryforwards of approximately $35.5 million and $6.6 million, respectively. The
carryforwards are significantly limited under Internal Revenue Code Section 382.
The Company has recorded a valuation allowance against its entire net deferred
tax asset as it believes it is more likely than not that its net deferred tax
asset will not be realized.
THE SALE OF A LARGE BLOCK OF SHARES OF THE COMPANY'S COMMON STOCK MAY ADVERSELY
AFFECT THE COMPANY'S STOCK PRICE.
Sales of a substantial number of shares of the Company's common stock in
the public market would adversely affect the market price for the Company's
common stock. As of March 27, 2000, the Company had approximately 25 million
shares of common stock outstanding. A substantial majority of these shares are
freely tradable. In addition to the shares currently outstanding and the shares
being offered hereby, approximately 13 million shares of common stock may be
issued upon exercise of outstanding options and warrants or upon exchange or
conversion of debt and other securities originally issued in private
transactions. Such additional shares, if issued, would generally be eligible for
resale in the public market without restriction or pursuant to the restrictions
of Rule 144. The Company currently has both "piggy-back" and demand registration
rights outstanding with respect to shares of outstanding common stock as well as
shares of common stock issuable upon the exercise of certain warrants and the
subsequent conversion thereof into common stock, and shares of common stock
issuable pursuant to the conversion of the company's Preferred Stock,
subordinated debt and subordinated convertible debentures. The registration and
public sale of such shares could adversely affect the market price of the
Company's common stock.
THE COMPANY'S STOCK PRICE FLUCTUATES SIGNIFICANTLY.
During the year ended December 31, 1999, the Company's
common stock traded between a low of $2.63 per share and a high of $14.75 per
share. The market price for the Company's common stock has been, and may
continue to be highly volatile depending on various factors including, among
others, the Company's consolidated operating results, expectations of analysts
and other investment groups, general conditions in the computer and other
electronic equipment industries, announcements of technological innovations or
new products, the Company's competitors or the Company's customers, and the
market for similar securities, which market is subject to various pressures. In
addition, the stock market is subject to price and volume fluctuations unrelated
to the Company's operating performance.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In June 1999, GeoSure, LP(GeoSure), a subsidiary of the Company, filed
a demand for arbitration against The Sanborn Company, LLC (Sanborn) with the
American Arbitration Association. GeoSure is party to a license agreement with
Sanborn to distribute historical fire insurance maps (Sanborn Maps) subject to
certain restrictions and a royalty based on the prevailing prices charged by
Sanborn for these maps. GeoSure alleges, among other things, that it has been
charged excess royalties and seeks recovery of the excess payments. Sanborn has
responded with allegations that GeoSure has underpaid these royalties and
likewise seeks recovery. The Company believes that Sanborn's 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.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
At a Special Meeting of Stockholders held on April 14, 2000, the
stockholders offered the grant of voting and conversion rights to the shares
of Series A-2 Convertible Preferred Stock. As a result of gaining voting and
conversion rights, the holders of Series A-2 Convertible Preferred Stock no
longer have the right to require the Company to redeem those shares.
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 17 of this Report.
b) Reports on Form 8-K.
The registrant filed a current report on Form 8-K dated January 3, 2000
which was amended on February 14, 2000. Under Item 2, the registrant
reported the acquisition of DMS.
17
<PAGE>
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: May 15, 2000 By /s/ Neil A. Johnson
-----------------------------
Neil A. Johnson
Chief Financial Officer
(Principal Financial Officer)
Date: May 15, 2000 By /s/ Brian Dean Conn
-----------------------------
Brian Dean Conn
Controller
(Principal Accounting Officer)
18
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Location
- ------ ----------- --------
<S> <C> <C>
3.1 Certificate of Incorporation.......... Incorporated by reference to the
- --- Company's definitive Proxy Statement
filed February 17, 1998
3.2 By-laws............................... Incorporated by reference to the
- --- Company's definitive Proxy Statement
filed February 17, 1998
27.1 Financial Data Schedule............... Filed electronically
- ----
</TABLE>
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,175
<SECURITIES> 0
<RECEIVABLES> 11,947
<ALLOWANCES> 2,307
<INVENTORY> 814
<CURRENT-ASSETS> 5,369
<PP&E> 10,402
<DEPRECIATION> 19,804
<TOTAL-ASSETS> 74,414
<CURRENT-LIABILITIES> 23,706
<BONDS> 0
0
1
<COMMON> 25
<OTHER-SE> 31,775
<TOTAL-LIABILITY-AND-EQUITY> 74,414
<SALES> 22,151
<TOTAL-REVENUES> 22,151
<CGS> 12,866
<TOTAL-COSTS> 10,868
<OTHER-EXPENSES> 800
<LOSS-PROVISION> 100
<INTEREST-EXPENSE> 776
<INCOME-PRETAX> (2,383)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,383)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,383)
<EPS-BASIC> (.10)
<EPS-DILUTED> (.10)
</TABLE>
