<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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,
25,681,478 shares outstanding on November 10, 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 AND NINE MONTHS ENDED 3
SEPTEMBER 30, 2000 (UNAUDITED) AND 1999 (UNAUDITED)
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2000 (UNAUDITED) AND 4-5
DECEMBER 31, 1999
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 6-7
30, 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 18
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 18
ITEM 5. OTHER INFORMATION 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
SIGNATURES 19
EXHIBIT INDEX 20
</TABLE>
<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>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues $ 22,430 $ 6,453 $ 66,316 $ 19,406
Cost of revenues 12,995 1,687 38,363 4,176
--------------------------------- ---------------------------------
Gross margin 9,435 4,766 27,953 15,230
Operating expenses:
Selling, general and administrative 8,065 4,440 24,357 13,808
Research and development 1,024 191 2,097 737
Integration charges - - - 1,309
Depreciation and amortization 1,004 412 3,089 1,205
Amortization of goodwill and
acquired intangible assets 1,341 484 4,033 1,475
Write-down of intangible assets - 7,063 - 7,063
--------------------------------- ---------------------------------
Total operating expenses 11,434 12,590 33,576 25,597
--------------------------------- ---------------------------------
Operating loss (1,999) (7,824) (5,623) (10,367)
Interest expense, net (755) (352) (2,337) (714)
Other income (expense) 6 (37) 193 (57)
--------------------------------- ---------------------------------
Net loss (2,748) (8,213) (7,767) (11,138)
Preferred stock dividends declared (75) (75) (225) (325)
Net loss attributable to common stockholders $ (2,823) $ (8,288) $ (7,992) $ (11,463)
================================= =================================
Basic and diluted loss per common share $ (0.11) $ (0.43) $ (0.32) $ (0.64)
Weighted average common shares outstanding 25,495,604 19,435,698 25,312,756 17,836,985
</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>
SEPTEMBER 30, DECEMBER 31,
ASSETS 2000 1999
------------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash $ 2,606 $ 5,105
Accounts receivable, net 10,844 10,230
Inventories 1,081 799
Other current assets 4,863 5,328
------------- ------------
Total current assets 19,394 21,462
Property, equipment and software, net 9,813 10,610
Other acquired assets, net 14,085 16,750
Goodwill, net 21,594 22,236
Other assets, net 5,111 6,594
------------- ------------
Total assets $ 69,997 $ 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>
SEPTEMBER 30, DECEMBER 31,
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
(UNAUDITED)
<S> <C> <C>
Current liabilities:
Current maturities of capital lease obligations $ 898 $ 827
Working capital note - 7,404
Accounts payable 4,956 6,061
Deferred revenue 5,205 4,407
Other current liabilities 4,890 6,013
------------- ------------
Total current liabilities 15,949 24,712
Deferred revenue, long-term portion 759 1,370
Capital lease obligations, less current maturities 515 735
Note payable to bank 7,939 -
Secured convertible note 17,504 16,762
------------- ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, Series A, A-1 and A-2 convertible, par value $.001;
liquidation value $21,029; 845,000 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; 70,000,000 shares authorized; 25,701,901 and
25,056,328 shares issued and outstanding in 2000 and 1999, respectively 26 25
Additional paid-in capital 90,470 88,974
Cumulative translation adjustment (248) -
Accumulated deficit (62,918) (54,927)
------------- ------------
Total stockholders' equity 27,331 34,073
------------- ------------
Total liabilities and stockholders' equity $ 69,997 $ 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>
NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- --------------
2000 1999
(UNAUDITED)
<S> <C> <C>
Cash Flows from Operating Activities
Net loss $ (7,767) $ (11,139)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 3,089 1,205
Amortization of goodwill and acquired intangible assets 4,033 1,475
Write-down of intangible assets - 7,063
Value of common stock contributed to employee benefit plan 610 -
Amortization of discount on debt 838 -
Changes in assets and liabilities, net of effects of
business acquisitions:
Trade accounts receivable (614) 322
Decrease in lease receivables 1,264 -
Inventories (282) -
Other current assets (45) 645
Accounts payable (1,102) (9)
Deferred revenues 187 (202)
Other current liabilities (653) (87)
----------------- --------------
Net cash used in operating activities (442) (727)
Cash Flows from Investing Activities
Purchases of equipment, furniture and software (1,376) (1,748)
Net change in deposits and other assets 269 (1,318)
Increase in intangible assets (395) (123)
----------------- --------------
Net cash used in investing activities (1,502) (3,189)
</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>
NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- --------------
2000 1999
(UNAUDITED)
<S> <C> <C>
Cash Flows from Financing Activities
Principal payments on long-term obligations (8,235) (9,488)
Proceeds from long-term obligations 7,939 7,124
Proceeds from exercise of stock options and issuance of
common and preferred stock 79 6,534
Proceeds from note receivable for issuance of common stock - 2,500
Distributions to partners - (93)
Net change in cumulative translation adjustment (248) -
Dividends on Series E and Series F Preferred Stock (225) (325)
----------------- --------------
Net cash (used in) provided by financing activities (690) 6,252
----------------- --------------
Effect of exchange rate changes on cash 135 -
----------------- --------------
Net increase (decrease) in cash (2,499) 2,336
Cash, beginning of period 5,105 476
----------------- --------------
Cash, end of period $ 2,606 $ 2,812
================= ==============
</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 AND NINE MONTHS ENDED SEPTEMBER 30, 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 and nine months ended September 30, 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 an acquisition 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.
MERGER WITH 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. 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 3, 2000, the Working Capital Note had been paid in full with
the proceeds from the financing from PNC Bank as discussed below. The Company
was in compliance with all covenants and performed all obligations required
under the terms of the Working Capital Note through May 3, 2000.
2. LOAN FROM PNC BANK
On May 3, 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 Prime rate
and are due to be repaid on the earlier of the maturity date of the Secured
Convertible Note or April 17, 2003. A portion of the proceeds from this loan
have been used to retire the Working Capital Note from Moore discussed above.
The Company is in compliance with all covenants and has performed all
obligations required under the terms of the credit agreement as of September
30, 2000.
3. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities ("SFAS No. 133"). SFAS No. 133 establishes accounting and
reporting standards for other contracts and for hedging activities. The
statement requires that an entity recognize all derivatives as either assets
or liabilities in the statement of financial position and measure those
instruments at fair market value. In June 1999, the FASB issued SFAS No. 137
Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133., SFAS No. 137 deferred
implementation of SFAS 133, until the first quarter of 2001. In June 2000, the
FASB issued SFAS No. 138., Accounting for Certain Derivative Instruments and
Certain Hedging Activities - An Amendment of FASB Statement No. 133. SFAS 138
amends the accounting and reporting standards of SFAS No. 33 for certain
derivative instruments and certain hedging activities.
The Company has evaluated, and will continue to evaluate in future
periods, the impact of SFAS Nos. 133 and 138 on its results of operations and
financial position. Management does not believe that the adoption of these
pronouncements will result in any material adjustments to the Company's
financial statements.
In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101 ("SAB 101") which summarizes the SEC
staff's position on selected revenue recognition issues. The Company does not
believe that adoption of this SAB will have a material impact on its
financial statements.
4. PREFERRED STOCK PURCHASE RIGHTS
The Company has declared a dividend distribution of one Preferred
Stock Purchase Right for each outstanding share of Common Stock of the
Company. The distribution was paid as of June 16, 2000, to stockholders of
record on that date. Each Right entitles the registered holder to purchase
from the Company one one-hundredth of a share.
-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,
expectations as to the availability and need for capital, 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.
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 Moore Data Management Services.
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 AND NINE MONTHS ENDED SEPTEMBER 30, 2000 TO THE THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 1999
REVENUES
Total revenues increased 248 percent from $6,453 for the three months
ended September 30, 1999, to $22,430 for the three months ended September 30,
2000 and increased 242 percent from $19,406 for the nine months ended September
30, 1999 to $66,316 for the nine months ended September 30, 2000. This increase
in revenues was primarily the result of the DMS acquisition in December 1999.
During the three months ended September 30, 2000, revenues from the DMS business
amounted to $16,394 or 73 percent of total revenue for the third quarter.
Non-DMS revenues for the third quarter of 2000 were $6,036 compared to $6,453 in
the third quarter of 1999.
Revenues for the RE/Commercial, RE/Consumer and RE/Professional
divisions were $5,027, $125 and $17,278, respectively, in the third quarter and
$15,640, $437 and $50,239, respectively, for the nine months ended September 30,
2000.
GROSS MARGIN
Gross margin increased 98 percent from $4,766 for the three months
ended September 30, 1999, to $9,435 for the three months ended September 30,
2000 and increased 84 percent from $15,230 for the nine months ended September
30, 1999 to $27,953 for the nine months ended September 30, 2000. Gross margin
as a percentage of revenue decreased from 74 percent of revenue for the three
months ended September 30, 1999 to 42 percent of revenue for the three months
ended September 30, 2000 and decreased from 78 percent of revenue for the nine
months ended September 30, 1999 to 42 percent of revenue for the nine months
ended September 30, 2000. The increase in overall gross margin amounts are
primarily attributable to the increase in revenues from the DMS acquisition,
however these DMS revenues typically have lower gross margin rates. Gross margin
rates for the third quarter of 2000 on DMS and non-DMS revenues were 28 percent
and 80 percent, respectively.
Gross margins for the RE/Commercial, RE/Consumer and RE/Professional
divisions in the third quarter were $4,118, $(96) and $5,413 respectively with
gross margin rates of 81.9 percent, (76.8) percent and 31.3 percent respectively
and $12,523, $(307) and $15,737, respectively with gross margin rates of 80.1
percent, (70.3) percent and 31.3 percent, respectively, for the nine months
ended September 30, 2000.
OPERATING EXPENSES
Operating expenses decreased 9 percent from $12,590 for the three
months ended September 30, 1999 to $11,434 for the three months ended September
30, 2000 and increased 31 percent from $25,597 for the nine months ended
September 30, 1999 to $33,576 for the nine months ended September 30, 2000. This
increase was attributable to expenses associated with DMS operations which
amounted to $5,532 and $15,756 in the three and nine months ended September 30,
2000. Non-DMS operating expenses decreased 53.1 percent, from $12,590 to $5,905
for the third quarter of 1999 and 2000, respectively. This decrease resulted
from reduced expenses from the amortization of acquired intangible assets and
was responsible for the decrease in operating expenses for the third quarter.
Operating expenses, excluding corporate overhead costs, depreciation
and amortization, for the RE/Commercial, RE/Consumer and RE/Professional
divisions in the third quarter were $2,287, $89 and $4,236, respectively, and
$7,440, $1,104 and $11,004, respectively for the nine months ended September 30,
2000.
INTEREST EXPENSE
Interest expense increased $403 or 114 percent from $352 for the three
months ended September 30, 1999 to $755 for the three months ended September 30,
2000 and increased $1,623 or 227 percent from $714 for the nine months ended
September 30, 1999 to $2,337 for the nine months ended September 30, 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 acquisition of DMS. The Working
Capital Note was repaid in full in the second quarter of 2000 by borrowings
under the Company's credit facilities. Interest expense attributable to the
-11-
<PAGE>
Subordinated Convertible Note during the third quarter of 2000 was $565, which
includes the amount of the amortization of the discount on this note payable.
The Company's income tax benefit was offset by an increase to its
income tax valuation allowance, resulting in a zero effective tax rate for
the nine months ended September 30, 2000.
-12-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the nine months ended
September 30, 2000 was $442 compared to net cash used in operating activities of
$727 during the nine months ended September 30, 1999. This decrease in cash used
was primarily the result of a decrease in accounts payable, accrued liabilities
and an increase in accounts receivable.
Net cash used in investing activities for the nine months ended
September 30, 2000 was $1,502 compared to $3,189 for the nine months ended
September 30, 1999. This decrease in cash used was due to a decrease in
purchases of equipment, furniture and software as well as a net decrease in
deposits and other assets.
Net cash used in financing activities, primarily to reduce existing
debt, was approximately $690 during the nine months ended September 30, 2000,
compared to $6,252 of net cash provided by financing activities during the nine
months ended September 30, 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 and in September 1999, the Company raised $5,000 from
an existing investor related to the issuance of the Company's Preferred Series A
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 Prime 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. A portion of the proceeds from this
note were used to retire the $7.5 million Working Capital Note issued to 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. 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.
-13-
<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 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 nine months ended
September 30, 2000 and during the year ended December 31, 1999. The Company's
cumulative losses as of September 30, 2000 were approximately $63 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 vary from quarter to quarter and 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 as 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.
-14-
<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 ACCEPTED BY 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.
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.
-15-
<PAGE>
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 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.
-16-
<PAGE>
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 September 30, 2000, the Company had approximately 26 million
shares of common stock outstanding. A substantial majority of these shares are
freely tradable. In addition to the shares currently outstanding, 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 first nine months of 2000, the Company's common stock traded
between a low of $1.00 per share and a high of $6.13 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.
-17-
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
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 20 of this Report.
b) Reports on Form 8-K.
None
-18-
<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: November 13, 2000 By /s/ Neil A. Johnson
---------------------------------
Neil A. Johnson
Senior Vice President Chief Financial
Officer
(Principal Financial Officer)
Date: November 13, 2000 By /s/ Gilbert T. Vasquez
---------------------------------
Gilbert T. Vasquez
Controller
(Principal Accounting Officer)
-19-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Location
------ ----------- --------
<S> <C> <C>
3.1 Restated Certificate of Incorporated by reference to Exhibit
Incorporation..................... 3.1 filed with the Company's report
on Form 10-QSB for the quarter ended
June 30, 2000
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>
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