<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
FORM 10-Q/A
(Amendment #1)
X AMENDMENT TO QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ----- SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-28284
INFONAUTICS, INC.
(exact name of registrant as specified in its charter)
Pennsylvania 23-2702366
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(State of other jurisdiction (IRS Employer ID No.)
of incorporation of organization)
900 West Valley Road, Suite 1000, Wayne, Pa 19087
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(Address of principal executive offices)
(610) 971-8840
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(Registrant's telephone number, including area code)
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The undersigned registrant hereby amends the following Item 1--Financial
Statements and Exhibit 11.1--Computation of Earnings per Share to its
Quarterly Report on Form 10-Q for the period ended September 30, 1996 to
provide in their entirety as set forth in this report.
Pursuant to the requirements of Section 13 of the Securities Act of 1934, the
registrant has duly caused this amendment to this report to be signed on its
behalf by the undersigned thereunto duly authorized
INFONAUTICS, INC.
By: Ronald A. Berg
---------------------------
Chief Financial Officer
Date: January 3, 1997
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
INFONAUTICS, INC.
Consolidated Balance Sheets
(unaudited)
September 30, December 31,
1996 1995
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Assets
Current assets:
Cash and cash equivalents. . . . . . . . . . $ 14,438,936 $ 962,010
Short-term investments 17,533,744 --
Receivables:
Trade. . . . . . . . . . . . . . . . . . 246,540 125,345
Other. . . . . . . . . . . . . . . . . . 65,208 250,000
Prepaid expenses and other assets. . . . . . 419,066 92,210
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Total current assets. . . . . . . . 32,703,494 1,429,565
Property and equipment, net. . . . . . . . . . 1,423,746 816,261
Prepaid and other assets . . . . . . . . . . . 165,116 156,635
Deferred financing costs . . . . . . . . . . . -- 130,000
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Total assets. . . . . . . . . . . . . $ 34,292,356 $ 2,532,461
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Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
Note payable - funding agreement . . . . . . $ -- $ 94,245
Accounts payable . . . . . . . . . . . . . . 721,012 756,169
Due to officer . . . . . . . . . . . . . . . -- 48,500
Accrued expenses . . . . . . . . . . . . . . 505,310 1,544,172
Deferred revenue . . . . . . . . . . . . . . 673,702 500,000
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Total current liabilities . . . . . . 1,900,024 2,943,086
Note payable - funding agreement . . . . . . . -- 138,192
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Total liabilities . . . . . . . . . . 1,900,024 3,081,278
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Commitments and contingencies
Shareholders' equity (deficit):
Preferred stock, no par value. . . . . . . . -- --
Class A common stock, no par value; 25,000,000
shares authorized; one vote per share;
9,386,834 and 5,935,748 shares issued and
outstanding at September 30, 1996
and December 31,1995 -- --
Class B common stock, no par value; 100,000
shares authorized, issued and outstanding;
50 votes per share . . . . . . . . . . . -- --
1
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Additional paid-in capital . . . . . . . . . 53,359,836 11,313,997
Deferred compensation. . . . . . . . . . . . (406,250) --
Accumulated deficit. . . . . . . . . . . . . (20,544,316) (11,505,336)
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32,409,270 (191,339)
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Less notes and stock subscription receivables. (16,938) (357,478)
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Total shareholders' equity (deficit). . . . 32,392,332 (548,817)
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Total liabilities and shareholders' equity. $ 34,292,356 $ 2,532,461
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The accompanying notes are an integral part of the financial statements.
2
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INFONAUTICS, INC.
Consolidated Statements Of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, 1996 September 30, 1996
---------------------------- ----------------------------
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . $ 315,011 $ 114,772 $ 934,683 $ 267,164
------------- ------------- ------------- -------------
Costs and expenses:
Cost of revenues.. . . . . . . . . . . 174,190 60,255 487,428 140,261
Customer support expenses. . . . . . . 80,373 48,570 216,438 87,128
Development expenses . . . . . . . . . 1,386,972 984,419 3,921,080 2,144,063
Sales and marketing expenses . . . . . 1,495,838 537,687 3,548,589 1,030,202
General and administrative expenses. . 1,033,924 546,504 2,569,824 1,342,096
------------- ------------- ------------- -------------
Total costs and expenses. . . . . . 4,171,297 2,177,435 10,743,359 4,743,750
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Loss from operations. . . . . . . . . . . (3,856,286) (2,062,663) (9,808,676) (4,476,586)
Interest and investment
income (expense), net . . . . . . . . 434,726 2,635 769,696 (4,920)
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Net loss. . . . . . . . . . . . . $(3,421,560) $(2,060,028) $(9,038,980) $(4,481,506)
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Net loss per common equivalent share . . . $ (0.36) $ (0.34) $ (1.13) $ (0.74)
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Weighted average number of common and
equivalent shares outstanding . . .. . . 9,486,834 6,062,289 7,964,814 6,062,289
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</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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INFONAUTICS, INC.
Consolidated Statements Of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
--------------------------------
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net Loss . . . . . . . . . . . . . . . . . . . . . $ (9,038,980) $ (4,481,506)
Adjustments to reconcile net loss to cash provided
by (used in) operating activities:
Depreciation and amortization. . . . . . . . . 375,732 189,036
Amortization of deferred compensation. . . . . 93,750 --
Common stock issued for services -- 99,098
Changes in operating assets & liabilities:
Receivables:
Trade . . . . . . . . . . . . . . . . . . (121,195) (77,443)
Other . . . . . . . . . . . . . . . . . . 184,792 (58,130)
Prepaid expenses and other assets . . . . . (326,856) (134,210)
Prepaid and other assets . . . . . . . . . (8,481) (46,040)
Accounts payable. . . . . . . . . . . . . . (35,157) 13,960
Accrued expenses. . . . . . . . . . . . . . (1,038,862) 368,113
Deferred revenue. . . . . . . . . . . . . . 173,702 (14,000)
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Net cash used in operating activities . (9,741,555) (4,141,122)
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Cash flows from investing activities:
Purchases of property and equipment. . . . . . . . (983,217) (478,091)
Purhase of investments, net . . . . . . . . . . . (17,533,744) --
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Net cash used in investing activities . (18,516,961) (478,091)
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Cash flows from financing activities:
Proceeds from issuance of common stock, net. . . . 42,016,379 6,453,838
Payments under note payable - funding agreement. . (232,437) (4,572)
Proceeds from long-term borrowings and note
payable. . . . . . . . . . . . . . . . . . . . . - 31,000
Repayment of loans to officer. . . . . . . . . . . (48,500) (36,375)
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Net cash provided by financing
activities . . . . . . . . . . . . . 41,735,442 6,443,891
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Net increase in cash and
cash equivalents . . . . . . . . . . 13,476,926 1,824,678
Cash and cash equivalents, beginning of period . . . 962,010 718,364
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Cash and cash equivalents, end of period . . . . . . $ 14,438,936 $ 2,543,042
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Supplemental disclosure of cash flow information and noncash investing and financing activities:
Cash paid for interest expense . . . . . . . . 58,916 6,654
Noncash items:
Issuance of stock for note and
subscription receivable . . . . . . . . . -- 54,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
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INFONAUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited financial statements of Infonautics, Inc. (the "Company")
presented herein have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission for
quarterly reports on Form 10-Q. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The Company believes, however, that the disclosures in
this Report are adequate to make the information presented not misleading. It
is suggested that these financial statements be read in conjunction with the
financial statements for the year ended December 31, 1995 and the notes thereto
included in the Company's Registration Statement on Form S-1 (No. 333-2428).
The financial information in this report reflects, in the opinion of
management, all adjustments of a normal recurring nature necessary to present
fairly the results for the interim period. Quarterly operating results may not
be indicative of results which would be expected for the full year.
2. Private Placement and Initial Public Offering
On February 26, 1996, the Company completed a private placement in which it
issued 1,201,086 shares of Class C Common Stock with proceeds to the Company of
approximately $12.9 million, which is net of approximately $0.8 million of
offering expenses.
In May 1996, the Company completed an initial public offering of 2,250,000
shares of its Class A Common Stock at $14.00 per share. The proceeds to the
Company, net of underwriting discounts, commissions and offering expenses were
approximately $28.7 million.
Concurrent with the closing of the initial public offering, all
outstanding shares of Class C Common Stock were converted into an equal number
shares of Class A Common Stock.
2. Cash and Cash equivalents
Cash equivalents are carried at cost, and consist primarily of highly
liquid money market instruments which approximate fair value.
3. Investments
The Company invests certain of its excess cash in debt instruments of the
U.S. Government, its agencies, and of high quality corporate issuers. All
highly liquid instruments with an original maturity of three months or less
are considered cash equivalents; those with original maturities greater than
three months are considered short-term investments. The Company has adopted
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (FAS 115) and, accordingly, has
classified all investments as available-for-sale.
At September 30, 1996, all investments were short-term and consisted primarily
of corporate debt securities and debt instruments of the U.S. Government and
U.S. Government agencies. At December 31, 1995, the Company did not hold any
short-term or long-term investments. Unrealized holding gains at September 30,
1996 were not significant.
5
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4. Shareholders' Equity
In February 1996, the Board of Directors of the Company authorized the
following, which were subsequently approved by the shareholders in April
1996: (i) an amendment to the Company's Articles of Incorporation, changing
the name of the Company from Infonautics Corporation to Infonautics, Inc.;
(ii) an increase in the number of authorized shares of Class A Common Stock
to 25,000,000; (iii) a 2-for-1 stock split in the form of a stock dividend;
(iv) a 500,000 increase in the number of shares of Class A Common Stock that
may be issued under the 1994 Omnibus Stock option plan and (v) the adoption
of the 1996 Equity Compensation plan, which provides for the issuance of a
maximum of 500,000 shares of Class A Common Stock pursuant to grants of stock
options, stock appreciation rights, restricted stock or performance units.
5. Net Loss Per Common Equivalent
Net loss per common equivalent share is computed based upon the weighted
average number of common shares outstanding during the periods presented.
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin Topic
4-D, all common shares and common equivalent shares issued by the Company
during the twelve-month period prior to the Company's initial public offering
have been included in the calculation as if they were outstanding, using the
treasury stock method, for all periods presented, at the initial public
offering price of $14.00 per share. Outstanding common stock equivalents have
not been included in computation of common equivalent shares for the period
subsequent to the IPO.
6. Revenue Recognition
Through December 31, 1995, all the Company's revenues were derived from
licensing its service to Prodigy. Revenues are recorded at the amount received
from Prodigy, net of Prodigy's fees. Revenues through September 30, 1996
include Prodigy related subscriptions, subscription revenue from the sale of
the Company's services over the Internet and revenue from the licensing of the
Company's core technology, the Electronic Printing Press. Revenues from
subscriptions are recognized in the month the subscription service is provided
for subscriptions to the consumer market.
In the three months ended September 30, 1996, revenue from the sale of the
Company's service over the Internet included sales to the institutional market,
which include schools and libraries. These agreements have up to twelve month
terms. Deferred revenue from these subscription agreements are recorded and
recognized over the term of the contract, beginning with the month the service
is commenced. Costs incurred with the procurement of the subscriptions and the
delivery of the service are expensed as incurred.
License fees are recognized when delivery and services related to the
license agreement are complete. Payments received in advance of providing
services or for a long-term license are deferred until the period such services
are provided.
7. Commitments
The Company leases its facilities and certain other equipment under
operating agreements expiring through 2000. Future noncancelable minimum
payments as of September 30, 1996 under these leases, for each fiscal year
ended December 31 are as follows:
1997 $ 755,000
1998 667,000
1999 385,000
2000 183,000
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$1,990,000
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6
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits & Reports on Form 8-K
(a) Exhibits:
11.1 Computation of net income (loss) per common share for the
three months ended September 30, 1996 and 1995.
(b) Reports on Form 8-K:
None.
7
<PAGE>
EXHIBIT 11.1
INFONAUTICS, INC.
Computation of Earnings Per Share
<TABLE>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Net loss applicable to
common shares ($3,421,560) ($2,060,028) ($9,038,980) ($4,481,506)
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Weighted average number
of shares outstanding
during the period 9,486,834 3,963,466 7,032,004 3,963,466
Incremental shares
calculated per
SAB Topic 4:D - 2,098,823 932,810 2,098,823
----------- ----------- ---------- ----------
Total weighted average
number of common and
equivalent shares
outstanding 9,486,834 6,062,289 7,964,814 6,062,289
----------- ---------- ----------- ---------
----------- ---------- ----------- ---------
Net loss per common
equivalent share ($0.36) ($0.34) ($1.13) ($0.74)
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ITEM 1
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 14438936
<SECURITIES> 17533744
<RECEIVABLES> 311748
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 32703494
<PP&E> 2150419
<DEPRECIATION> 726673
<TOTAL-ASSETS> 34292356
<CURRENT-LIABILITIES> 1900024
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 32392332
<TOTAL-LIABILITY-AND-EQUITY> 34292356
<SALES> 934683
<TOTAL-REVENUES> 934683
<CGS> 0
<TOTAL-COSTS> 10743359
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (9038980)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9038980)
<EPS-PRIMARY> (1.13)
<EPS-DILUTED> (1.13)
</TABLE>
