<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
--------------
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the transition period from _____________ to ________________
Commission file number 0-28284
INFONAUTICS, INC.
(exact name of registrant as specified in its charter)
Pennsylvania 23-2707366
------------ ----------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
900 West Valley Road, Suite 1000, Wayne, Pa 19087
--------------------------------------------------
(Address of principal executive offices)
(610) 971-8840
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at September 30, 1997
----- -----------------------------
Class A Common Stock, no par value 9,391,627
Class B Common Stock, no par value 100,000
1
<PAGE>
INFONAUTICS, INC.
INDEX
Page Number
-----------
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30,
1997 (unaudited) and December 31, 1996 3
Consolidated Statements of Operations (unaudited) for the
three months and nine months ended September 30, 1997 and
September 30, 1996 4
Consolidated Statements of Cash Flows (unaudited) for the
nine months ended September 30, 1997 and September 30, 1996 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
2
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
INFONAUTICS, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------------- ---------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents............................ $ 3,448,737 $ 16,064,159
Short-term investments............................... 11,829,843 11,314,956
Receivables:
Trade, less allowance for doubtful accounts
of $32,566 and $31,590 in 1997 and 1996........ 1,690,360 373,509
Other........................................... - 62,406
Prepaid expenses and other assets.................... 886,380 565,858
-------------- ---------------
Total current assets......................... 17,855,320 28,380,888
Property and equipment, net.............................. 2,863,558 1,701,306
Prepaid and other assets................................. 167,969 145,265
-------------- ---------------
Total assets................................. $20,886,847 $ 30,227,459
-------------- ---------------
-------------- ---------------
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of obligations under capital lease... $ 260,643 $ --
Accounts payable..................................... 1,403,839 1,199,621
Accrued expenses..................................... 1,054,701 543,920
Deferred revenue..................................... 3,158,415 796,129
-------------- ---------------
Total current liabilities.................... 5,877,598 2,539,670
-------------- ---------------
Obligations under capital lease...................... 484,630 --
-------------- ---------------
Total liabilities............................ 6,362,228 2,539,670
-------------- ---------------
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; 9,391,627
and 9,389,357 shares issued and outstanding at
September 30, 1997 and December 31, 1996.......... -- --
Class B common stock, no par value; 100,000 shares
authorized, issued and outstanding; 50 votes per
share............................................. -- --
Additional paid-in capital........................... 53,360,221 53,354,345
Deferred compensation................................ (281,250) (375,000)
Accumulated deficit.................................. (38,554,352) (25,291,556)
-------------- ---------------
Total shareholders' equity........................ 14,524,619 27,687,789
-------------- ---------------
Total liabilities and shareholders' equity $ 20,886,847 $ 30,227,459
-------------- ---------------
-------------- ---------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE>
INFONAUTICS, INC.
Consolidated Statements Of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues................................. $ 1,666,900 $ 315,011 $ 4,378,350 $ 934,683
----------- ----------- ----------- ----------
Costs and expenses:
Cost of revenues..................... 673,707 174,190 1,743,981 487,428
Customer support expenses............ 162,483 80,373 420,530 216,438
Development expenses................. 1,777,896 1,386,972 4,628,190 3,921,080
Sales and marketing expenses......... 2,038,631 1,495,838 7,732,203 3,548,589
General and administrative expenses.. 1,140,204 1,033,924 3,951,247 2,569,824
----------- ----------- ------------ -----------
Total costs and expenses........ 5,792,921 4,171,297 18,476,151 10,743,359
----------- ----------- ------------ -----------
Loss from operations..................... (4,126,021) (3,856,286) (14,097,801) (9,808,676)
Interest income, net..................... 228,266 434,726 835,005 769,696
----------- ------------ ------------ -----------
Net loss........................ $(3,897,755) $(3,421,560) $(13,262,796) $(9,038,980)
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
Net loss per common equivalent share..... $ (.41) $ (.36) $ (1.40) $ (1.13)
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
Weighted average number of common and
equivalent shares outstanding.......... 9,491,600 9,486,800 9,491,600 7,964,800
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
INFONAUTICS, INC.
Consolidated Statements Of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................. $ (13,262,796) $ ( 9,038,980)
Adjustments to reconcile net loss to cash
provided by (used in) operating activities:
Depreciation and amortization..................... 787,269 375,732
Provision for losses on accounts receivable....... (976) --
Amortization of deferred compensation............. 93,750 93,750
Changes in operating assets and liabilities:
Receivables:
Trade........................................ (33,175) (121,195)
Other........................................ 62,406 184,792
Prepaid and other assets........................ (343,226) (335,337)
Accounts payable................................ 124,218 (35,157)
Accrued expenses................................ 510,781 (1,038,862)
Deferred revenue................................ 1,079,586 173,702
-------------- -------------
Net cash used in operating activities........ (10,982,163) (9,741,555)
-------------- -------------
-------------- -------------
Cash flows from investing activities:
Purchases of property and equipment.................. (1,869,522) (983,217)
Purchases of short-term investments.................. (16,357,886) (17,533,744)
Proceeds from maturity of short-term investments..... 15,843,000 --
-------------- -------------
Net cash used in investing activities........ (2,384,408) (18,516,961)
-------------- -------------
-------------- -------------
Cash flows from financing activities:
Net proceeds from issuance of common stock........... 5,876 42,016,379
Proceeds from sale-leaseback of equipment............ 766,504 --
Payments on capital lease obligations................ (21,231) --
Payments under note payable -- funding agreement..... -- (232,437)
Repayment of loans to officer........................ -- (48,500)
-------------- -------------
Net cash provided by financing activities.... 751,149 41,735,442
-------------- -------------
Net increase (decrease) in cash and cash equivalents..... (12,615,422) 13,476,926
Cash and cash equivalents, beginning of period........... 16,064,159 962,010
-------------- -------------
Cash and cash equivalents, end of period................. $ 3,448,737 $ 14,438,936
-------------- -------------
-------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
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,
1996 and the notes thereto included in the Company's 1996 Annual Report on
Form 10-K.
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. Net Loss Per Common Equivalent
Net loss per common equivalent share is computed using the weighted
average number of Class A and Class B Common Shares outstanding during the
periods presented and excludes all common stock equivalents as they are
anti-dilutive. However, pursuant to Securities and Exchange Commission Staff
Accounting Bulletin Topic 4-D, for the periods prior to the Company's initial
public offering, such computations include all common shares and common
equivalent shares issued by the Company during the twelve-months preceding
the Company's initial public offering as if they were outstanding for all
periods presented.
3. Impact of Accounting Standards Issued in 1997:
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share." This
Statement establishes standards for computing and presenting earnings per
share (EPS) and applies to entities with publicly held common stock or
potential common stock. This Statement is effective for financial statements
issued for periods ending after December 15, 1997, earlier application is not
permitted. This Statement requires restatement for all prior-period EPS data
presented. The Company is currently evaluating the impact, if any, adoption
of SFAS No. 128 will have on its financial statements.
4. Revenue Recognition:
Revenues from consumer subscriptions and customer billing services are
recognized in the month the service is provided. Those subscriptions sold
through remarketers are recognized net of the related fees. Revenues from
licensing contracts are recognized when delivery and services related to the
license agreement are complete. Revenue from integration services are
recognized upon customer acceptance. Revenues from long-term subscription
agreements are deferred and recognized over the term of the respective
agreement as service is provided. Costs incurred with the procurement of
subscriptions and the delivery of the service are expensed as incurred.
6
<PAGE>
Payments received in advance of providing services or for a long-term
license are deferred until the period such services are provided.
5. Supplemental Disclosure of Cash Flow Information:
At September 30, 1997, included in accounts receivable and deferred
revenue was $1,283,000 representing that portion of subscription revenue from
long-term agreements which have been billed, but not yet received or
recognized.
6. Commitments and Contingencies:
Leases:
In the third quarter 1997, the Company secured a $1,000,000 revolving
lease line, of which approximately $230,000 is available through September
30, 1998, collateralized by substantially all the Company's property and
equipment and receivables. Under this arrangement, the Company sold $766,504
of equipment purchased in the first half of 1997, at its net book
value which approximated fair market value, to the lessor, and leased back
the equipment.
The leases are classified as capital leases. The equipment has original
lease terms ranging from 24 to 30 months, with a fair value purchase option
at the end of each lease term. Leased equipment included in property and
equipment at September 30, 1997 is as follows:
September 30,
1997
- ---------------------------------------------------------------
Computer Equipment $ 766,504
Accumulated Amortization -
- ---------------------------------------------------------------
$ 766,504
-------------
-------------
The Company leases its facilities and certain other equipment under
agreements classified as operating leases expiring through 2002. Future
minimum payments as of September 30, 1997, by year and in the aggregate,
under these noncancelable capital leases and operating leases for each fiscal
year ended December 31 are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
- -----------------------------------------------------------------------------
<S> <C> <C>
1997 $ 70,227 $ 480,000
1998 421,363 2,061,000
1999 407,846 1,462,000
2000 49,644 634,000
2001 -- 179,000
Thereafter -- 23,000
- -----------------------------------------------------------------------------
Total minimum lease payments 949,080 $ 4,839,000
------------
------------
Amount representing interest 203,807
- -----------------------------------------------------
Present value of net minimum
payments 745,273
Current Portion 260,643
- -----------------------------------------------------
484,630
- -----------------------------------------------------
-------
</TABLE>
7
<PAGE>
Agreements:
Effective October 1, 1997, an agreement entered into in 1994, with a computer
company to supply certain computer hardware systems through February 1999,
was restructured to provide the equipment under an eighteen month lease. The
lease, which is classified as an operating lease, includes escalating
scheduled quarterly lease payments which will be amortized over the term of
the lease on a straight-line basis. Previously, the supplier had received a
certain percentage of the Company's revenue from subscriptions.
7. Restricted Investments:
The Company has restricted investments at September 30, 1997 of approximately
$330,000. This amount consists of restricted U.S Treasury Notes held as
collateral by a financial institution against letters of credit for leasing
arrangements (see Note 6).
8
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
This Report contains, in addition to historical information, forward
looking statements by the Company with regard to its expectations as to
financial results and other aspects of its business that involve risks and
uncertainties and may constitute forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
include statements regarding subscriber cancellations, increasing costs,
growth and expansion plans, cost of sales, sales and marketing plans,
operating results, and the sufficiency of the Company's liquidity and
capital. Such statements are based on management's current expectations and
are subject to a number of uncertainties and risks that could cause actual
results to differ materially from those described in the forward-looking
statements. Factors that may cause such a difference include, but are not
limited to, those described under "Risk Factors" in the Company's 1996 Annual
Report on Form 10-K. Financial information discussed in this report is
rounded to the nearest thousand. The following discussion should be read in
conjunction with the Company's Annual Report on Form 10-K, for the year ended
December 31, 1996.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
Revenues. Total revenues were $1,667,000 for the three months ended September
30, 1997 compared to $315,000 for the three months ended September 30, 1996.
Total revenues were $4,378,000 for the nine months ended September 30, 1997
compared to $935,000 for the nine months ended September 30, 1996.
Institutional subscription revenue was $613,000 for the three months
ended September 30,1997 compared to $39,000 for the three months ended
September 30, 1996. Institutional subscription revenue was $1,114,000 for the
nine months ended September 30, 1997 compared to $60,000 for the nine months
ended September 30, 1996. Institutional subscription revenue in the third
quarter continued to increase primarily because of increases in the number of
contracts with schools and libraries. Institutional contract amounts vary
from contract to contract.
Consumer revenue for the three months ended September 30, 1997 more than
tripled to $924,000, from $251,000 for the three months ended September 30,
1996. Consumer revenues were $2,758,000 for the nine months ended September
30, 1997 compared to $675,000 for the nine months ended September 30, 1996.
The increase in consumer revenue was primarily due to increased
subscription revenues from a larger subscriber base and a change in the mix
of revenues with Electric Library accounting for an increasingly greater
percentage. Elibrary, which was launched late in the first quarter 1996, had
33,600 subscribers at September 30, 1997, as compared to 5,900 at September
30, 1996. Homework Helper, available only through Prodigy's Classic service,
had 3,500 monthly subscribers at September 30, 1997, compared to 6,900 at
September 30, 1996. The Company expects to continue to see a decline in
revenue from Homework Helper subscriptions.
New Media Services revenue was $130,000 for the three months ended
September 30, 1997 compared to $25,000 for the three months ended September
30, 1996. New Media Services revenue was $506,000 for the nine months ended
September 30, 1997 compared to $200,000 for the nine months ended
9
<PAGE>
September 30, 1996. New Media Services revenue in the third quarter of 1997
was generated primarily from hosting services and integration services, while
in the third quarter of 1996, New Media Services revenue was derived from one
agreement to license the Company's core technology.
An amount of $500,000, received in 1995 as consideration for limited
exclusivity contained in a marketing agreement, was included in revenues for
the nine months ended September 30, 1997. During the second quarter of 1997,
the period of exclusivity ended and the Company has no further obligation.
Prior to recognition of revenue, the amount was recorded as deferred revenue.
Cost of revenues. Cost of revenues consists primarily of royalties and
license fees paid to providers of content, hardware and software, as well as
communication costs associated with the delivery of the online services.
Cost of revenues were $674,000 for the three months ended September 30, 1997,
or 40% of total revenues. Cost of revenues for the three months ended
September 30, 1996 were $174,000, or 55% of total revenues. Cost of revenues
of $1,744,000 and $487,000, for the nine months ended September 30, 1997 and
1996, respectively, were as a percentage of revenues, 40% and 52%,
respectively. Cost of revenues, as a percentage of total revenues, varies
from period to period as the mix of revenues differs and because certain
direct costs, such as communication costs, do not increase at the same rate
as revenues. Management anticipates that as revenues continue to increase,
the cost of sales percentage should become less volatile.
Customer Support. Customer support expenses consist primarily of costs
associated with the staffing of professionals responsible for assisting users
with technical and product issues and monitoring customer feedback. Customer
support expenses were $162,000 for the three months ended September 30, 1997
compared to $80,000 for the three months ended September 30, 1996. Customer
support expenses were $421,000 for the nine months ended September 30, 1997
compared to $216,000 for the nine months ended September 30, 1996. The
increase resulted primarily from higher staffing levels and the continuing
need for the Company to provide additional support to its growing customer
base. The Company anticipates continuing to make increasing customer support
expenditures as the Company provides service to an increased number of
subscribers and institutional customers.
Development. Development expenses consist primarily of costs associated with
the design, programming, testing, documentation and support of the Company's
new and existing software, services and databases. Development expenses were
$1,778,000 for three months ended September 30, 1997, compared to $1,387,000
for the three months ended September 30, 1996. Development expenses were
$4,628,000 for the nine months ended September 30, 1997 compared to
$3,921,000 for the nine months ended September 30, 1996. The Company
anticipates continuing to make significant development expenditures, as it
develops new and enhanced services, such as Electric Library '98, launched in
October 1997.
Sales and Marketing. Sales and marketing expenses consist primarily of costs
related to compensation, attendance at conferences and trade shows,
advertising, promotion and other marketing programs. Sales and marketing
costs were $2,039,000 for the three months ended September 30, 1997 compared
to $1,496,000 for the three months ended September 30, 1996. Sales and
marketing costs were $7,732,000 for the nine months ended September 30, 1997
compared to $3,549,000 for the nine months ended September 30, 1996. This
increase was a result of the continued efforts to increase sales and expand
distribution channels including increases in the number of sales and
marketing personnel, and expansion of promotional marketing programs,
including online advertising and attendance at school and library trade
shows. The Company expects to continue to incur significant sales and
marketing expenses.
General and Administrative. General and administrative expenses consist
primarily of expenses for administration, office operations, finance and
general management activities, including legal, accounting, and other
10
<PAGE>
professional fees. General and administrative expenses were $1,140,000 for
the three months ended September 30, 1997 compared to $1,034,000 for the
three months ended September 30, 1996. General and administrative expenses
were $3,951,000 for the nine months ended September 30, 1997 compared to
$2,570,000 for the nine months ended September 30, 1996. The increases in
general and administrative expenses were due to the expansion of internal
staffing and increases in professional service fees to support the Company's
expanded operations. The Company anticipates that its general and
administrative expenses will increase in absolute dollar amounts but not as a
percentage of revenues.
Interest Income, net. Interest income, net, decreased to $228,000 in the
three month period ended September 30, 1997, from $435,000 for the comparable
period in 1996 due to less interest earned on lower cash, cash equivalents,
and short-term investment balances.
Income taxes. The Company has not recorded an income tax benefit because it
has incurred net operating losses since inception.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash, cash equivalents, and short-term investments of
approximately $15.3 million at September 30, 1997, as compared to $27.4
million at December 31, 1996, a decrease of $12.1 million. Net cash used in
operations was $10.9 million for the nine months ended September 30, 1997
compared with $9.7 million for the comparable period in 1996, due primarily
to a greater net loss, offset by an increase in deferred revenues of $2.4
million, in the nine month period ended September 30, 1997.
Net cash used in investing activities for the nine months ended September 30,
1997 was $2,464,000, $1,949,000 used for capital expenditures and
$515,000,used for investment purchases, net of proceeds. Net cash used in
investing activities for the nine months ended September 30, 1996 was
$18,517,000, $983,000 for capital expenditures and $17,534,000, used for
investment purchases, net of proceeds.
Net cash provided by financing activities for the nine months ended September
30, 1997 was $751,000 primarily provided by a sale-leaseback of equipment,
compared to the $42 million proceeds raised in the public offering and
private placement in the comparable period in 1996.
The Company acquired approximately $1,870,000 of fixed assets during the nine
months ended September 30, 1997, the most significant purchases being
computer equipment to expand the capacity of the system, which was
necessitated by the increase in subscribers from consumer and institutional
contracts. As of September 30, 1997 the Company did not have any material
commitments for capital expenditures for the balance of 1997. The Company
does, however, expect to purchase approximately $500,000 of office furniture,
leasehold improvements and computer equipment through the end of 1997.
As of September 30, 1997, the Company's principal source of liquidity was
approximately $15.3 million in cash, cash equivalents and short-term
investments. Additionally, as of September 30, 1997, the Company had
available $230,000 under a revolving lease line available to finance
equipment purchases, which is expected to be utilized by the end of 1997.
The Company believes that these funds will be sufficient to meet its
anticipated cash needs for working capital and capital
11
<PAGE>
expenditures for at least the next 12 months. However, any projections of
future cash needs and cash flows is subject to substantial uncertainty. If
the cash and cash equivalents balance and cash generated by operations is
insufficient to satisfy the Company's liquidity requirements, the Company may
be required to sell additional debt or equity securities. The sale of
additional equity or debt securities, if available, could result in dilution
to the Company's stockholders.
12
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits & Reports on Form 8-K
(a)Exhibits
Exhibit 10.1 Agreement of Lease dated June 14, 1994, as amended
September 19,1997 between Infonautics, Inc. and West Valley
Business Trust.
Exhibit 11.1 Computation of net income (loss) per common share for
the three and nine months ended September 30, 1997 and 1996.
(b)Reports on Form 8-K
No reports on Form 8-K were filed during the three-month period
ended September 30, 1997.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INFONAUTICS, INC.
Date: November 14, 1997 /s/ Marvin I. Weinberger
-----------------------------
Marvin I. Weinberger
Chief Executive Officer
Date: November 14, 1997 /s/ Ronald A. Berg
----------------------------
Ronald A. Berg
Vice President-Finance and
Administration, Chief Financial Officer
(Principal Financial
and Accounting Officer)
14
<PAGE>
Exhibit 10.1
SEVENTH AMENDMENT OF LEASE
THIS AMENDMENT, made and entered into as of 9/19/97 by and between FMOB
ASSOCIATES ("Landlord") and INFONAUTICS CORPORATION, a Pennsylvania
Corporation ("Tenant").
WHEREAS, by lease dated June 1994 (the "Initial Lease"), Landlord leased
to Tenant and Tenant leased from Landlord a portion of a building located at
900 West Valley Road, Wayne, Pennsylvania, consisting of 7,756 square feet of
space in Building 900 as more particularly described in the Lease (the
"Original Premises").
WHEREAS, by that certain first amendment to lease dated January, 1995
(the "First Amendment") Landlord leased to Tenant an additional (i) 1,522
square feet of space in Building 1000 as more particularly described in the
First Amendment ("First Expansion Space"), and (ii) 1,247 square feet of
space in Building 1000 a more particularly described in the First Amendment
("Second Expansion Space").
WHEREAS, by that certain second amendment to lease dated June 30, 1995
(the "Second Amendment") Landlord leased to Tenant an additional 5,462 square
feet of space in Building 1100 more particularly described in the Second
Amendment ("Third Expansion Space"), and Landlord and Tenant extended the
Initial Term Expiration Date to July 31, 2000.
WHEREAS, by that certain third amendment to lease dated as of November
13, 1995, Landlord leased to Tenant Suite 1101 consisting of approximately
1,509 square feet of space in Building 1100 as more particularly described in
the Third Amendment ("Fourth Expansion Space").
WHEREAS, by that certain fourth amendment to lease dated as of May 22,
1996, Landlord and Tenant agree to the terms of a utility access agreement.
WHEREAS, pursuant to the terms of the Third Amendment, the Initial Lease
was amended to redefine the term "Demised Premises" to include the Original
Premises, the First Expansion Space, the Second Expansion Space, the Third
Expansion Space and the Fourth Expansion Space thereby increasing the total
square footage of the Demised Premises to 17,496 square feet of the Tenant's
Proportionate Share to 10.83%. The Fifth Expansion Space thereby increases
the total square footage of the Demised Premises to 21,040 square feet and
Tenant's Proportionate Share to 13.03%.
WHEREAS, by that certain fifth amendment to lease dated April 18, 1996
(the "Fifth Amendment"), Landlord leased to Tenant Suites 801, 802 and 804
consisting of approximately 3,544 square feet of space in Building 800 as
more particularly described in the Fifth Amendment ("Fifth Expansion Space").
<PAGE>
WHEREAS, by that certain Sixth Amendment to lease dated 4/14/97 (the
"Sixth Amendment") Landlord leased to Tenant the following suites:
Suite 402 (Focus) - 3,569 SF
Suite 701 (Textile) - 1,575 SF
Suite 702 (CSR) - 3,610 SF
Suite 504 (Vacant) - 1,263 SF
Suite 503 (J. Miller) - 1,566 SF
---------
TOTAL 11,583 SF
as more particularly described in the Sixth Amendment ("Sixth Expansion
Space").
WHEREAS, Tenant desires to lease from Landlord and Landlord desires to
lease to Tenant Suite 401, 900 W. Valley Road, consisting of approximately
1,641 SF as more particularly outlined in Exhibit "A" attached hereto as
("Seventh Expansion Space").
NOW THEREFORE, in consideration of the sum of $1.00, in hand well and
truly paid, and other good and valuable consideration, the receipt of which
is hereby acknowledged, and in further consideration of the mutual premises
and covenants herein contained, the parties, intending to be legally bound,
agree:
1. The Initial Lease, as amended, is sometimes referred to herein as
the "Lease". All other capitalized terms used in this Amendment shall have
the same meaning as assigned to them in the WHEREAS clauses of this Amendment
or the Lease, unless otherwise specifically noted. The provisions of the
WHEREAS clauses are incorporated herein as if fully set forth.
2. Commencing on November 1, 1997, the Seventh Expansion Space
Commencement Date, the Lease is amended to redefine the term "Demised
Premises" to include the Original Premises, the First Expansion Space, the
Second Expansion Space, the Third Expansion Space, the Fourth Expansion, the
Fifth Expansion, the Sixth Expansion and the Seventh Expansion Space for all
purposes, provided that the following provisions shall apply to the Seventh
Expansion Space only notwithstanding any contrary provisions of the Lease:
(i) the term of the lease of Seventh Expansion Space shall be Forty Eight
(48) Months, (ii) the Extension Option provided in the Initial Lease shall
not apply to the Seventh Expansion Space; (iii) the first and second
termination options provided in the Initial Lease shall not apply to the
Seventh Expansion Space, (iv) Tenant's Proportionate Share with respect to
the Seventh Expansion Space only shall be 1.02% (1,641/161,519 sq. ft.)
increasing the total square footage to 34,267 sq. ft. and Tenant's
proportionate share to 21-22%; and (v) Base Rent for the Seventh Expansion
Space shall be $31,999.50 per year, payable in advance in equal monthly
installments of $2,666.63.
<PAGE>
3. Landlord's Work.
a. Landlord and Tenant agrees that Tenant is leasing this Seventh
Expansion Space in its current "As-Is" condition with the exception that
Landlord will contribute a fit-out allowance of $1.00/SF per year ($6,564.00)
representing Landlord's sole construction allowance contribution to Tenant.
All other improvements to the space Tenant wishes to perform shall be at
Tenant's sole cost and expense with such improvements being submitted in
writing to Landlord for Landlord's approval of the work, such approval not to
be unreasonably withheld.
4. Tenant shall, at Tenant's sole cost and expense, keep the Seventh
Expansion Space and every part thereof in good condition and repair, damage
thereto from fire or other casualty and ordinary wear and tear,
condemnation, and from the negligence or misconduct of Landlord, its agents,
employees, invitees, contractors, subcontractors, and others for whom
Landlord is legally responsible, alone excepted. The parties hereto affirm
that Landlord has made no representations to Tenant respecting the condition
of the Seventh Expansion Space or the Building except as specifically herein
set forth in writing.
5. Tenant and Landlord agree that Tenant has no further expansion
options under the Lease.
6. ALL TIMES HEREIN AND IN THE LEASE ARE AND REMAIN OF THE ESSENCE.
7. Except as modified herein, all terms and conditions of the Lease
shall remain in full force and effect. In the event of any inconsistency
between the terms of this Amendment and the terms of the Lease, the terms of
this Amendment shall prevail. The Lease and this Amendment represent the
entire agreement between the parties relating to the lease of the Premises
and shall supersede any other agreements, whether written or oral. There are
no understandings, representations or warranties of any kind, pertaining to
the lease of the Premises which are not expressly set forth in this Amendment
and the Lease. ALL OF THE CONFESSIONS OF JUDGMENTS FOR DAMAGES AND POSSESSION
CONTAINED IN THE LEASE ARE HEREBY RATIFIED, CONFIRMED AND RESTATED BY TENANT
AND ARE INCORPORATED HEREIN BY REFERENCE AS THROUGH SET FORTH IN THEIR
ENTIRETY.
8. Submission of Lease/Lease Amendment to Tenant. The submission by
Landlord to Tenant of this Lease Amendment shall have no binding force or
effect, shall not constitute an option for the leasing of the Demised
Premises, shall not constitute a lease or agreement to enter into a lease
(even if such term is less than three (3) years in duration), nor confer any
rights or impose any obligations upon either party until the execution
thereof by Landlord and the delivery of an executed original copy thereof by
Landlord to Tenant or Tenant's representative.
[Signature Page Following]
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
on the date first above mentioned.
LANDLORD:
FMOB ASSOCIATES BY WESTVALLEY, INC.
its General Partner
BY: /s/ Jack D. Loew
-------------------------------
President
TENANT:
INFONAUTICS CORPORATION, a
Pennsylvania Corporation
ATTEST: BY: /s/ Ronald A. Berg
----------------------------- -------------------------------
[Corporate Seal] Name: Ronald A. Berg
Vice President-Finance
<PAGE>
EXHIBIT 11.1
INFONAUTICS, INC.
Computation of Earnings Per Share
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net loss applicable to
common shares $(3,897,800) $(3,421,600) $(13,262,800) $(9,039,000)
------------ ------------ ------------- ------------
Weighted average number
of shares
outstanding
during the period 9,491,600 9,486,800 9,491,600 7,032,000
Incremental shares
calculated per
SAB Topic 4:D -- -- -- 932,800
------------ ------------ ------------- ------------
Total weighted average
number of common and
equivalent shares
outstanding 9,491,600 9,486,800 9,491,600 7,964,800
------------ ------------ -------------- ------------
Net loss per common
equivalent share (1) $ (.41) $ (.36) $ (1.40) $ (1.13)
------------ ------------ -------------- ------------
</TABLE>
(1)Fully diluted net loss per share has not been presented separately, as the
amounts would not be materially different from primary net loss per share.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000909494
<NAME> INFONAUTICS INC
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,448,737
<SECURITIES> 11,829,843
<RECEIVABLES> 1,722,926
<ALLOWANCES> 32,566
<INVENTORY> 0
<CURRENT-ASSETS> 17,855,320
<PP&E> 4,301,790
<DEPRECIATION> 1,438,232
<TOTAL-ASSETS> 20,886,847
<CURRENT-LIABILITIES> 5,877,598
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 14,524,619
<TOTAL-LIABILITY-AND-EQUITY> 20,886,847
<SALES> 4,378,350
<TOTAL-REVENUES> 4,378,350
<CGS> 1,743,981
<TOTAL-COSTS> 18,476,151
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (13,262,796)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,262,796)
<EPS-PRIMARY> (1.40)
<EPS-DILUTED> (1.40)
</TABLE>
