U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
[ ] Transition Report Under Section 13 or 15(d) of
the Exchange Act
For the transition period from ____________ to ____________.
Commission file number 0-22849
VISUAL DATA CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 65-0420146
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1291 SW 29TH Avenue
Pompano Beach, Florida 33069
------------------------------------------------
(Address of Principal Executive Office)
(954) 917-6655
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
1600 S. Dixie Highway, Suite 3A
Boca Raton, FL 33432
- --------------------------------------------------------------------------------
(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 [ ] No [X]
State the number of shares outstanding of each of the Issuer's classes of common
equity, as of the latest practicable date:
Common Stock Outstanding as of September 12, 1997: 2,929,225
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(Unaudited)
ASSETS
Current assets
Cash $ 49,131
Accounts receivable, net 77,564
Prepaid expenses 78,805
-----------
Total current assets 205,500
Property and equipment, net 281,005
-----------
Other assets
Financing costs, net 82,062
Deposits 33,974
Organization costs, net 231
Deferred offering costs 926,926
-----------
1,043,193
-----------
$ 1,529,698
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilites:
Obligation under capital leases $ 85,806
Accounts payable and accrued expenses 498,432
Customer deposits 73,500
Stockholder notes payable, net 667,375
-----------
Total current liabilities 1,325,113
-----------
Long term liabilites:
Obligation under capital leases,
net of current portion 14,964
-----------
Commitments
Redeemable Equity 453,825
-----------
Stockholders' equity:
Preferred stock, Par Value $.0001 Per Share;
Authorized 5,000,000 Shares; Issued -0- Shares: 0
Common stock, Par Value $.0001 Per Share;
Authorized 20,000,000 Shares; Issued 1,929,225: 193
Paid in capital 3,481,123
Accumulated deficit (3,745,520)
-----------
(264,204)
-----------
$ 1,529,698
===========
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended Three months ended
---------------------------- ----------------------------
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue $ 184,407 $ 9,444 $ 44,704 $ 2,638
----------- ----------- ----------- -----------
Selling, General and
Administrative Expenses
Compensation and
Related Costs 546,154 526,551 174,605 157,168
Production 63,470 83,742 25,784 33,990
Occupancy 35,814 36,241 12,308 13,116
Professional fees 150,491 107,214 76,749 45,321
Interest 181,527 18,012 128,261 6,851
Other 372,446 325,703 146,508 177,597
----------- ----------- ----------- -----------
1,349,902 1,097,463 564,215 434,043
----------- ----------- ----------- -----------
Loss before other income (1,165,495) (1,088,019) (519,511) (431,405)
Other Income
Interest 1,002 459 0 0
----------- ----------- ----------- -----------
Net loss $(1,164,493) $(1,087,560) $ (519,511) $ (431,405)
=========== =========== =========== ===========
Weighted Average Shares 1,910,166 1,467,774 1,910,166 1,467,774
=========== =========== =========== ===========
(Loss) Per Share ($ 0.61) ($ 0.74) ($ 0.27) ($ 0.29)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
----------------------------
June 30, 1997 June 30, 1996
------------- -------------
Cash flows used in operating activities $(666,821) $(644,645)
Cash flows used in investing activities (22,209) (62,115)
Cash flows provided by financing activities 579,784 458,082
--------- ---------
Net decrease in cash (109,246) (248,678)
Cash:
Beginning of period 158,377 249,678
--------- ---------
End of period $ 49,131 $ 1,000
========= =========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARY
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
- ------------------
Visual Data Corporation ("VDC") and HotelView Corporation ("HVC"), collectively
known as the "Company", were incorporated on May 17, 1993 and September 15,
1993, respectively.
VDC was a development stage company as all its efforts had been toward
establishing a new business. Planned principal operations have commenced and it
exited the development stage during September, 1996. The Company specializes in
the production and marketing/distribution of video information libraries
intended for use by the general public through the Internet and interactive
television as well as other media primarily in the United States. These
libraries will contain short concise vignettes on various topics such as travel,
medicine, cooking and fitness. HVC has developed a hotel information database
and is marketing a laser disc library to travel agents.
Interim Financial Data
- ----------------------
The accompanying financial statements do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The financial statements of the Company as of September
30, 1996 should be read in conjunction with these statements. The financial
information included herein has not been audited. However, in the opinion of
management, the accompanying unaudited interim financial statements contain all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the consolidated financial position of VDC and subsidiary as of
June 30, 1997, and the results of their operations for the nine months and the
three months ended June 30, 1996 and 1997 and cash flows for the nine months
ended June 30, 1996 and 1997. The results of operations and cash flows for the
periods are not necessarily indicative of the results of operations or cash
flows for a full year.
Stock Based Compensation
- ------------------------
As permitted under SFAS123 Accounting for Stock Based Compensation, the Company
has elected not to adopt the fair value based method of accounting for its stock
based compensation plan but will continue to account for such compensation using
the intrinsic value method under the provisions of APB opinion 25.
5
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARY
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2: NOTES PAYABLE - SHAREHOLDERS
Certain stockholders made loans to the Company for working capital purposes.
These loans bear interest at 10% per annum and are to be repaid the earlier of
one month following the effective date of the Form SB-2 registration or 12
months from the date of the notes. These shareholders also received 106,250
shares of common stock valued by management at $4.27 per share, reflecting
amounts ascribed to shares issued for services during the nine months ended June
30, 1997. The notes have been recorded at a discount of $453,825 reflecting this
average per share price. This discount is being amortized by the straight-line
method over a twelve month period, amortization amounted to $131,275 during the
nine months ended June 30, 1997 (Note 9).
The Company received an extension of time in which to repay $15,000 of
shareholder loans and interest that was in default. This extension deferred the
payments until the completion of the public offering of the Company's stock.
NOTE 3: CONVERSION OF SECURITIES
During the nine months ended June 30, 1997 all of the Company's Series A
preferred stock and Series B preferred stock were converted into 374,333 shares
of common stock. Options for 2,678 shares were exercised for $3,750. Warrants
for 59,687 shares were exercised for $86,690. Additionally, the noteholders
elected to convert the convertible notes into 212,500 shares of common stock.
NOTE 4: COMMON STOCK
During the nine months ended June 30, 1997, the Company issued common stock for
services valued at $4.27 based upon agreed-upon contract amounts.
The Company, at June 30, 1997 has reserved 393,645 shares of common stock for
issuance relating to unexpired options and warrants.
NOTE 5: CONTINGENT SERVICE FEES
In the normal course of business, the Company enters into contracts with hotels
that provide for the payment of service fees directly related to the amount
received by the Hotel from bookings made by the HVC travel agents network for
room revenue. The Company is unable to predict the timing or probability of
collection of these service fees.
6
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARY
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6: NEW ACCOUNTING STANDARDS
In March 1997, Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings per Share" was issued. SFAS No. 128 requires that public companies
present basic earnings per share (EPS) and diluted EPS, instead of primary and
fully diluted EPS. Basic EPS is computed by dividing income available to
stockholders by the weighted average number of common shares (computed without
considering common stock equivalents) during the period. Diluted EPS is measured
similar to basic EPS but takes into consideration dilutive potential common
shares.
SFAS 128 becomes effective for financial statements issued for periods ending
after December 15, 1997. The effect of adopting SFAS 128 has not been
determined.
NOTE 7: STOCK OPTION PLAN
In February, 1997, the stockholders approved the adoption of the 1996 stock
option plan.
NOTE 8: REDEEMABLE EQUITY
The Company issued 106,250 shares of common stock as part of certain loans made
to the Company by stockholders immediately prior to and subsequent to the date
of filing a registration statement. The Company has been advised that the
issuance of these shares may be integrated with the offering under this
prospectus since these shares were issued in connection with a private placement
that was conducted during the period while the Company was in registration.
While the Company believes that it complied with the Federal securities laws and
while each of the holders of these notes and shares has advised the Company that
they will waive all right of rescission, such holders therefore can require the
Company to rescind the transactions and redeem these shares as part of the
repayment of the debt. The amounts ascribed to these shares out of the proceeds
of the loans aggregating $453,825 has been reflected in the accompanying balance
sheet as redeemable equity.
NOTE 9: SUBSEQUENT EVENT
In August, 1997 the Company completed an underwritten initial public offering of
1,000,000 shares of common stock and 1,000,000 warrants for the purchase of
1,000,000 shares of common stock at a public offering price of $6.00 per share
and $.10 per warrant (the Offering). The net proceeds of the offering of
approximately $4,800,000 is to be used to replenish working capital, repay debt,
acquire equipment, expand facilities, marketing and advertising.
7
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARY
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9: SUBSEQUENT EVENT (Continued)
In addition to the issuance and sale of 1,000,000 shares of common stock,
pursuant to an over allotment option which was granted to the underwriters, up
to 150,000 additional shares may be purchased from certain officers and
directors and sold by the underwriters.
In connection with the offering, the Company granted to the underwriters, for
nominal consideration, rights to purchase from the Company up to 200,000 shares
of common stock. They are initially exercisable at a price of 140% of the
initial public offering price per share of common stock (or the exercise price
per share for the warrants) for a period of four years commencing one year from
the effective date of the registration statement and are restricted from sale,
transfer and assignment for a specified period.
The following pro-forma condensed balance sheet as of June 30, 1997 has been
adjusted to reflect the following activity in conjunction with the closing of
the Company's initial public offering on August 4, 1997: the sale of 1,000,000
shares of common stock and 1,000,000 warrants; payment of accounting and legal
fees associated with the offering; prepayment of a financial management fee;
repayment of shareholder notes and associated accrued interest; and the
adjustment for deferred offering costs.
PRO FORMA CONSOLIDATED BALANCE SHEET
ASSETS
CURRENT ASSETS $ 4,276,114
OTHER ASSETS 315,210
-----------
$ 4,591,324
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES $ 472,760
LONG-TERM LIABILITIES 14,964
STOCKHOLDERS' EQUITY 4,103,600
-----------
$ 4,591,324
===========
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
PLAN OF OPERATIONS
The Company exited the development stage during the fourth quarter of fiscal
1996. During its development stage, the Company produced and edited the
vignettes which presently comprise the HotelView(R) Library which is currently
installed in approximately 200 travel agencies in the United States.
Implementation of the Company's plan of operation will be funded by the
Company's receipt of the net proceeds of approximately $4.8 million from its
initial public offering which closed August 4, 1997. Management of the Company
estimates such proceeds will satisfy the Company's cash requirements for
approximately 24 months following the closing of the offering.
The Company's current plan of operation includes continuing to expand its base
of travel agencies equipped with the HotelView(R) Library as well as to
establish the distribution of the HotelView(R) Library over the Internet. The
Company intends to continue the development of additional content and the
intended purchase of the requisite hardware and software to link the Company to
the Internet and provide links to other websites. Management presently
anticipates the Company's Internet links will be operational during the first
quarter of fiscal 1998.
The Company further intends to complete the development of certain additional
content libraries for travel related topics as well as other topics of general
consumer interest. During the 12 month period following the date of the initial
public offering, management intends to expand the HotelView(R) Library as well
as complete initial volumes of the ConventionView(TM), CondoView(TM),
AttractionView(TM) and CareView(TM) libraries. Based upon other opportunities
which may present themselves to the Company, the Company may seek acquisitions
of additional content or technology to facilitate the expansion of the Company's
operations. While none of these additional libraries will be dependent upon the
technological architecture of the service (Internet, On-line service or ITV)
which will deliver the content to the consumer, the usage will be dependent upon
the availability to the consumer of high-speed data transmission capability such
as digital satellite technology and cable modems. In conjunction with the sale
of cable modems by cable companies such as Time Warner Cable, Cox Cable
Communications, Continental Cablevision, Comcast Corp. and TeleCommunications
Inc. which began in late 1996, management of the Company anticipates access to
the Internet will be made increasing more available through cable companies via
such cable modems during the balance of calendar 1997. Any delay, however, in
such availability may delay the Company's broad introduction of additional
libraries.
In conjunction with the Company's intended 12 month plan of operation to expand
its libraries, the Company intends to complete the acquisition of certain
software products from Digital Criteria Search Technologies, Inc. during the
first fiscal quarter of 1998. The software products being acquired will form the
basis for the Company's TalentView(TM) Library.
9
<PAGE>
As of June 30, 1997, the Company had incurred operating losses of $3,745,520
since inception. Revenues of $184,407 for the nine months ended June 30, 1997
were recognized based on the redemption of room credit balances due to bookings
made by the HotelView travel agent network and tape sales to the hotels.
Interest expense for the nine months ended June 30, 1997 increased tenfold over
the prior period primarily due to the non-cash amortization of discounts on
certain notes payable in the amount of $131,275. Deposits collected through June
30, 1997 will be recognized as revenue by the Company in fiscal 1998 as it
fulfills certain obligations; i.e., to install the videos into the travel
agencies or make them available via the Internet. Currently the Company offers
hotels and resorts the option of either paying the contract in full in cash at
the time of execution or paying a cash deposit, with the balance of the contract
amount due under a performance-based arrangement. Because there is no time
limitation on when or if the balance of the fees will become billable, the
Company cannot predict when these funds will be available. Although management
believes it will continue to bill and collect amounts due under this
performance-based arrangement during the balance of the current fiscal year, any
long term delay in or inability to bill these amounts may have an adverse affect
on the Company. Hotel contract renewals are being billed on a cash basis.
The Company has budgeted additional dollars to be spent on advertising the
HotelView(R) Library to the trade (including hotel chains, travel agencies and
travel industry associations) as well as to consumers to expand product
awareness.
The Company intends to increase the number of hotels participating in its
library through joint ventures and alliances with travel service companies
having the ability to penetrate the corporate hotel chain and management company
markets. On January 14, 1997, the Company entered into a written agreement with
Pegasus Systems, Inc., wherein Pegasus, which provides transaction processing
services between travel agents, airline reservation systems and to hotels,
resorts and hotel chains, has agreed to use its reasonable efforts to market,
endorse and promote the Library to each of its hotel clients and to obtain
executed agreements from hotels for inclusion in the Library. Discussions with
several other companies are expected to result in marketing and sales agreements
during fiscal 1997 and 1998.
LIQUIDITY AND CAPITAL RESOURCES
From inception (May 17, 1993) through June 30, 1997, the Company's capital has
been provided by the sale of stock, debentures, convertible debt, the exercise
of warrants and shareholder loans. These funds have been used for production,
compensation, acquisition of equipment and general operations of the Company
during its development stage. Accordingly, the Company's cash and equivalents
decreased primarily as a result of implementing the Company's sales and
marketing strategy, as well as continued development of the Company's travel
agent network and product development.
10
<PAGE>
Based on the level of success of its HotelView(R) Library and expected
introduction of additional libraries that the Company believes can be used in
conjunction with most forms of media now conceived or developed in the future,
the Company anticipates the acquisition of additional capital equipment
including editing facilities, travel agent equipment and an Internet file server
with significant capacity and memory to store video files. Additionally, the
Company anticipates moving its principal offices to larger facilities by
September 1997 and increasing the number of its employees, as required. The
Company currently leases its facilities on a month to month basis.
The Company expects to expand its video production capability by adding
additional editing suites as demand for the Company's products increases. A
portion of the use of proceeds from the initial public offering will be used by
the Company for down payments on additional editing suites as well as the
initial costs of staff for the editing suites. Should the demand for the
Company's products continue to increase, of which there are no assurances, the
Company has the option of adding a second shift of editing suite personnel
thereby increasing its post-production capacity without additional capital
expenditures.
During December 1996 through June 1997, the Company raised an additional
$975,000 through private placements. These proceeds were used to finance
operations, further market the HotelView(R) Library and repay shareholder loans
of $35,000 and payables incurred in the ordinary course of business. It is
expected that these funds will provide sufficient working capital through the
effective date of the initial public offering, at which time both the results of
operations, as well as the proceeds from the offering should be sufficient to
maintain the business for the 24 month period following the effective date of
the initial public offering.
In August, 1997 the Company completed an underwritten initial public offering of
1,000,000 shares of common stock and 1,000,000 warrants for the purchase of
1,000,000 shares of common stock at a public offering price of $6.00 per share
and $.10 per warrant (the Offering). The net proceeds of the offering of
approximately $4,800,000 is to be used to replenish working capital, repay debt,
acquire equipment, expand facilities, marketing and advertising.
11
<PAGE>
Part II - Other Information
---------------------------
Items 1 through 5 are not applicable.
Item 6. Exhibits and Reports on Form 8-K
No reports were filed on Form 8-K by Visual Data Corporation during the quarter
ended June 30, 1997.
SIGNATURE
---------
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 as a duly authorized officer and as the chief financial officer of
the Registrant.
VISUAL DATA CORPORATION
(Registrant)
Date: September 12, 1997 By: /s/ Randy S. Selman
------------------------------------------
Randy S. Selman
President, Chief Executive Officer and
Acting Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VISUAL DATA CORPORATION FOR THE NINE MONTHS ENDED ENDED
JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 49
<SECURITIES> 0
<RECEIVABLES> 99
<ALLOWANCES> 21
<INVENTORY> 0
<CURRENT-ASSETS> 206
<PP&E> 372
<DEPRECIATION> 91
<TOTAL-ASSETS> 1,530
<CURRENT-LIABILITIES> 1,325
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 264
<TOTAL-LIABILITY-AND-EQUITY> 1,530
<SALES> 184
<TOTAL-REVENUES> 184
<CGS> 0
<TOTAL-COSTS> 645
<OTHER-EXPENSES> 523
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 182
<INCOME-PRETAX> (1,164)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,164)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,164)
<EPS-PRIMARY> (.61)
<EPS-DILUTED> (.61)
</TABLE>
