SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report: Oct 7, 1998
VISUAL DATA CORPORATION
-----------------------
(Exact name of registrant as specified in its charter)
FLORIDA 000-22849 65-0420146
------- --------- ----------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
1291 SW 29th Avenue
Pompano Beach, Florida 33068
----------------------------
(Address of executive offices and Zip Code)
Registrant's telephone number, including area code: (954) 917-6655
not applicable
--------------
(Former name or former address, if changed since last report)
<PAGE>
Item 7: Financial Statements, Pro Forma Financial Statements and Exhibits
(a) Audited Financial Statements of EDnet, Inc.
(b) Unaudited Pro Forma Financial Information
<PAGE>
EDNET, INC.
------------
REPORT ON AUDITS OF FINANCIAL STATEMENTS
for the years ended June 30, 1998 and 1997
<PAGE>
EDNET, INC.
CONTENTS
Page
Independent Auditors' Report F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Stockholders' Equity F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6-F-24
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of EDnet, Inc.
We have audited the accompanying consolidated balance sheets of EDnet, Inc. and
subsidiaries as of June 30, 1998 and 1997 and the related consolidated
statements of operations, stockholders' equity, and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of EDnet, Inc. and
subsidiaries as of June 30, 1998 and 1997 and the consolidated results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
San Francisco, California
July 23, 1998
F-1
<PAGE>
EDNET, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and 1997
------------
<TABLE>
<CAPTION>
ASSETS 1998 1997
---- ----
<S> <C> <C>
Current assets:
Cash $ 32,911 $ 31,067
Accounts receivable, net of allowance for doubtful accounts of
$17,502 and $31,875 in 1998 and 1997, respectively (Note 3) 471,341 445,121
Inventories 87,157 202,913
Prepaid expenses 58,823 -
Other current assets 16,665 25,523
----------- -----------
Total current assets 666,897 704,624
Note receivable-related party (Notes 1 and 4) 283,746 -
Property and equipment, net (Note 5) 391,481 556,533
Investment (Note 1) - 166,667
Other assets 13,711 7,237
Deferred tax asset, net of valuation allowance of $376,000 and
$1,134,000 in 1998 and 1997, respectively (Note 8) - -
----------- -----------
$ 1,355,835 $ 1,435,061
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 388,325 $ 1,648,165
Accrued expenses 294,980 313,241
Deferred revenue 21,286 69,193
Line of credit (Note 7) 8,872 34,627
Notes payable-related party (Note 6) 40,500 55,500
Notes payable (Note 6) - 1,440,000
Current portion of capital lease obligations (Note 9) 9,288 27,817
----------- -----------
Total current liabilities 763,251 3,588,543
Capital lease obligations (Note 9) 11,470 20,904
----------- -----------
Total liabilities 774,721 3,609,447
----------- -----------
Commitments and contingency (Notes 9 and 15).
Stockholders' equity:
Convertible preferred stock; $1,000 par value; 1,750 shares authorized;
150 shares issued and outstanding in 1997 - 117,541
Common stock; $0.001 par value; 50,000,000 shares authorized;
16,761,836 and 5,740,465 shares issued and outstanding in 1998
and 1997, respectively 16,761 5,740
Additional paid-in capital 6,755,443 4,411,559
Accumulated deficit (6,191,090) (6,709,226)
----------- -----------
Total stockholders' equity (accumulated deficit) 581,114 (2,174,386)
----------- -----------
$ 1,355,835 $ 1,435,061
=========== ===========
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-2
<PAGE>
EDNET, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended June 30, 1998 and 1997
------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revenue:
Equipment sales $ 874,785 $ 961,677
Installation and monthly fees 610,514 541,856
Usage fees 1,617,291 1,305,992
Web design and consulting 784,528 862,525
Rental fees 99,384 117,993
Other 17,839 17,327
----------- -------------
4,004,341 3,807,370
Cost of sales 2,602,494 2,277,118
----------- -------------
Gross profit 1,401,847 1,530,252
Sales and marketing 666,985 948,549
Research and development - 1,017,233
Operating expenses 1,490,593 2,817,355
----------- -------------
Loss from operations before other income (expenses) and provision
for income taxes and extraordinary item (755,731) (3,252,885)
----------- -------------
Other income (expenses)
Interest income 4,166 1,837
Interest expense (63,772) (147,166)
Gain (loss) on sale of equipment 3,160 (853)
Goodwill write-off, net (Note 1) - (867,214)
Gain on sale of investment (Note 1) 422,225 -
Forgiveness of debt 200,000 -
----------- -------------
Total other income (expenses) 565,779 (1,013,396)
----------- -------------
Loss before provision for income taxes and extraordinary item (189,952) (4,266,281)
Provision for income taxes (Note 8) 2,400 3,266
----------- -------------
Loss before extraordinary item (192,352) (4,269,547)
Extraordinary item-gain on restructuring of debt (no applicable income taxes)
(Note 1) 710,488 -
----------- -------------
Net income (loss) $ 518,136 $ (4,269,547)
=========== =============
Basic and diluted earnings (loss) per share:
Loss from operations before extraordinary item $ (0.024) $ (0.857)
Extraordinary item 0.089 -
----------- -------------
Net income (loss) $ 0.065 $ (0.857)
=========== ============
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-3
<PAGE>
EDNET, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended June 30, 1998 and 1997
------------
<TABLE>
<CAPTION>
Common Stock Preferred Stock
------------------- ---------------- Additional
Shares Amount Shares Amount Paid-in Capital
------ ------ ------ ------ ---------------
<S> <C> <C> <C>
Balance, July 1, 1996 4,468,322 $ 4,468 - - $ 2,758,644
Common shares issued under IBS earn-out agreement 125,000 125 - - 195,188
Common shares issued under Regulation D offerings 582,143 582 - - 755,792
Common shares issued pursuant to consulting agreement 500,000 500 - - 652,000
Common shares issued under conversion of Viscorp notes 65,000 65 - - 49,935
Preferred shares issued under Regulation S offering - - 150 $ 117,541 -
Net loss - - - - -
----------- --------- ---- ---------- ------------
Ending balance, June 30, 1997 5,740,465 5,740 150 117,541 4,411,559
Common shares issued under Regulation D offering 738,000 738 - - 126,382
Common shares issued under S-8 offering 400,000 400 - - 399,600
Common shares issued to Rusell & Onggara 1,000,000 1,000 - - 374,000
Conversion of preferred shares to common 150,000 150 (150) (117,541) 117,391
Common shares issued pursuant to consulting service 169,954 170 - - 21,074
Common shares issued to VDC 8,563,417 8,563 - - 1,305,437
Net income - - - - -
----------- --------- ---- ---------- ------------
Ending balance, June 30, 1998 16,761,836 $ 16,761 - - $ 6,755,443
=========== ========= ==== ========== ============
(RESTUBBED TABLE)
Accumulated
Deficit Total
------------ -----
<C> <C>
Balance, July 1, 1996 $ (2,439,679) $ 323,433
Common shares issued under IBS earn-out agreement - 195,313
Common shares issued under Regulation D offerings - 756,374
Common shares issued pursuant to consulting agreement - 652,500
Common shares issued under conversion of Viscorp notes - 50,000
Preferred shares issued under Regulation S offering - 117,541
Net loss (4,269,547) (4,269,547)
------------ ------------
Ending balance, June 30, 1997 (6,709,226) (2,174,386)
Common shares issued under Regulation D offering - 127,120
Common shares issued under S-8 offering - 400,000
Common shares issued to Rusell & Onggara - 375,000
Conversion of preferred shares to common - -
Common shares issued pursuant to consulting service - 21,244
Common shares issued to VDC - 1,314,000
Net income 518,136 518,136
------------ ------------
Ending balance, June 30, 1998 $ (6,191,090) $ 581,114
============ ============
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-4
<PAGE>
EDNET, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended June 30, 1998 and 1997
------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 518,136 $ (4,269,547)
Adjustments to reconcile net income (loss) to cash used in operating activities:
Stock issued in lieu of consideration for services 421,244 847,813
Goodwill write-off - 867,213
Depreciation and amortization 199,458 409,171
(Gain) loss on sale of fixed assets (3,160) 853
Gain on sale of investment (422,225) -
Gain on write-off of note payable (200,000) -
Inventory write-off 49,061 -
Noncash debt restructure (773,026) -
(Increase) decrease in assets:
Accounts receivable (26,220) 32,955
Inventories 66,695 (55,504)
Prepaid expenses (58,823) -
Other current assets 8,858 (11,225)
Other assets (6,474) 72,105
Increase (decrease) in liabilities:
Accounts payable (868,083) 988,456
Accrued expenses 16,739 (76,761)
Deferred revenue (47,907) (430)
----------- ------------
Net cash used in operating activities (1,125,727) (1,194,901)
----------- ------------
Cash flows from investing activities:
Purchase of property and equipment (31,246) (256,259)
Sale of investment 588,892 -
Change in investment from spin-off - (166,667)
----------- ------------
Net cash provided by (used in) investing activities 557,646 (422,926)
----------- ------------
Cash flows from financing activities:
Proceeds from borrowing - 750,000
Principal payments on long-term debt (115,481) (195,491)
Payments on capital leases (27,963) (19,394)
Sale of common stock 739,124 756,374
Sale of preferred stock - 117,541
Change in line of credit (25,755) 17,989
----------- ------------
Net cash provided by financing activities 569,925 1,427,019
----------- ------------
Net increase (decrease) in cash 1,844 (190,808)
Cash at beginning of year 31,067 221,875
----------- ------------
Cash at end of year $ 32,911 $ 31,067
=========== ============
</TABLE>
Supplemental disclosure of cash flow information (see Note 14).
The accompanying notes are an integral
part of these consolidated financial statements.
F-5
<PAGE>
EDNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------
1. The Company
Summary of Business
EDnet, Inc. (the Company), a Colorado corporation, and its subsidiaries
develop and market integrated systems for the delivery, storage, and
management of professional-quality digital communications for
media-based applications, including audio and video production for the
U. S. entertainment industry. The Company, through strategic alliances
with long-distance carriers, regional telephone companies, satellite
operators, and independent fiber optic telecommunications providers,
has established a worldwide network that enables the exchange of high
quality audio, video, multimedia, and data communications. The Company
provides engineering services and application-specific technical
advice, audio, video, and networking hardware and software as part of
its business. Additionally, through one of its wholly owned
subsidiaries, the Company provides Internet web site development and
hosting services.
Organization
The Company's principal subsidiary, Entertainment Digital Network
(EDN), was originally incorporated in the state of Nevada in June 1992.
In January 1993, EDN was reincorporated in the state of California.
During September and October of 1995, EDN's stockholders exchanged 100%
of their shares of common stock for 1,519,538 shares of common stock of
AP Office Equipment (APO), a public company with no operations and no
significant assets or liabilities. At the time of the exchange, APO, a
Colorado corporation that was incorporated in May 1994, had 747,500
shares of common stock outstanding. Concurrently, APO sold 1,500,000
shares of common stock to a group of investors for $.665 per share. APO
then changed its name to EDnet, Inc. EDN became a subsidiary of the
Company as a result of this transaction. For accounting purposes, this
transaction has been treated as a recapitalization of EDN, recognizing
the issuance of shares of common stock for the net assets of EDN. The
historical financial statements prior to this transaction are those of
EDN.
Investment by Visual Data Corporation
On June 20, 1998, the Company entered into an agreement with Visual
Data Corporation (VDC), an SEC registrant, to sell a 51% (8,563,417
shares) ownership interest in the Company's common stock. The form of
payment consisted of:
<TABLE>
<CAPTION>
<S> <C>
Cash $ 698,004
VDC stock: 75,000 shares (valued at $3.75 per share) 281,250
VDS warrants: 50,000 (valued at $2.74 per warrant) 137,000
Secured note receivable (see Note 4) 283,746
------------
1,400,000
Less expenses 86,000
------------
Net investment $ 1,314,000
============
</TABLE>
Continued
F-6
<PAGE>
EDNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
------------
1. The Company, continued
Investment by Visual Data Corporation, continued
In addition, the Company issued a blanket mirror option covering
6,542,722 shares (3,304,979 options and 3,237,743 warrants), which
entitles VDC to acquire shares equal to those actually purchased upon
exercise of options and warrants by others at 10 cents per share (see
Note 10). In addition, the Company gave the investment banker who
organized the transaction 750,000 warrants at an exercise price of
$.145.
The transaction was contingent upon certain restructuring of accounts
payable debt the Company had incurred over the prior three years.
The following table summarizes the adjustments made according to the
settlement agreement:
<TABLE>
<CAPTION>
Amount Debt Amount
Due Discharge Settled
--- --------- -------
<S> <C> <C> <C>
EDnet, Inc.:
Trade and unsecured claims $ 257,376 $ 137,817 $ 119,559
Notes payable (see Note 6) 904,019 381,269 522,750
Entertainment Digital Network:
Trade and unsecured claims 179,664 109,435 70,229
Internet Business Solutions:
Trade and unsecured claims 201,699 81,967 119,732
----------- --------- ---------
Total $ 1,542,758 $ 710,488 $ 832,270
=========== ========= =========
</TABLE>
Regulation D Equity Placements
The Company has offered three Regulation D equity placements in the
past two fiscal years.
In August 1996, the Company had offered up to a maximum of $3,000,000
in units (each consisting of one share of its common stock and one
warrant) at a price per unit of the lesser of $3.00 or the average
closing bid price of its common stock during a consecutive 30-day
period immediately preceding the termination date less 30%. Each share
of stock came with a warrant to purchase common stock through July 31,
1999 at a price of the lesser of $4.75 or the average closing bid price
during a consecutive 30-day period immediately preceding the
termination date as explained above. This offering was closed as of
November 30, 1996, with 317,143 units sold at a price of $1.75 per
share and a warrants exercise price of $2.50 per share.
In December 1996, the Company had offered up to a maximum of $5,000,000
in shares at a price of $1.00 per share. The offering terminated in
early 1997 with the sale of 265,000 shares at a price of $1.00 per
share. Holders of this common stock will have piggyback and Form S-3
registration rights.
Continued
F-7
<PAGE>
EDNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
------------
1. The Company, continued
Regulation D Equity Placements, continued
On July 10, 1997, the Company offered up to a maximum of 3,750,000
units (each consisting of one share of common stock and one warrant)
for T Bar W Ranch Investments (T Bar) to purchase shares of the Company
at a price of $.20 per unit. Each warrant is exercisable until the
fifth (5th) anniversary of the date of its issuance and entitles the
holder to purchase one share at an exercise price of $1.00 per share.
The warrants had an antidilution clause in its terms. T-Bar invested
$147,600 to acquire 738,000 shares and 738,000 warrants. The Company
negotiated an agreement with T-Bar in June 1998 to reduce the warrant
exercise price to $.10 per share in exchange for removal of the
antidilution clause.
The Regulation D equity placement for these three offerings totaled as
follows:
<TABLE>
<CAPTION>
Offering Date Common Shares Warrants
------------- ------------- --------
<S> <C> <C> <C>
August 1996 317,143 317,143
December 20, 1996 265,000 -
July 10, 1997 738,000 738,000
----------- -----------
Total 1,320,143 1,055,143
=========== ===========
</TABLE>
Regulation S Equity Offering
On February 3, 1997, the Company offered up to $1,750,000 of its Series
A Preferred Stock at $1,000 per share in an offering exempt from
registration under Regulation S of the Securities Act of 1933. The
shares were convertible into common stock at any time until the third
anniversary of their issuance at the lesser of 70% of the market price
or the closing price but subject to the floor of $1.00 per share. One
hundred fifty shares were purchased on February 27, 1997 and converted
to 150,000 common shares on May 29, 1998. The discount of 30% off of
the market price on the conversion of stock was not recorded because
the stock was converted at $1.00 per share (the minimum), which was
greater than the current price at the conversion rate.
Acquisition of Internet Worldwide Business Solutions
On June 24, 1996, the Company acquired all the outstanding shares of
common stock of Internet Worldwide Business Solutions (IBS) in a
business combination accounted for as a purchase. IBS is primarily an
Internet service provider specializing in the development and hosting
of web sites. The results of operations of IBS are included in the
accompanying financial statements since the date of acquisition. The
purchase price of $1,162,568 included 311,284 shares of the Company's
common stock, notes payable in the aggregate amount of $500,000 and
$40,000 of acquisition related costs. The purchase price exceeded the
estimated fair value of the net tangible assets of IBS by $1,088,568.
The excess was reflected as goodwill on the balance sheet and was
originally amortized using the straight-line method over a five-year
period. During fiscal year 1997 the Company reevaluated the recovery of
its goodwill and determined that the remaining balance be written off.
Continued
F-8
<PAGE>
EDNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
------------
1. The Company, continued
Acquisition of Internet Worldwide Business Solutions, continued
In conjunction with the acquisition, under the terms of its
nonstatutory stock option plan, options to purchase an aggregate of
50,000 shares of common stock of the Company were granted to certain
IBS employees at $1.25 per share.
On December 31, 1996, the Company amended the terms of its previously
consummated acquisition of its wholly owned subsidiary, Internet
Business Solutions (IBS) by dividing IBS into two separate
corporations. IBS's inherent service business continues to operate as
IBS. IBS licensed the IBS website software to Breakthrough Software,
Inc. (BSI) and agreed to lend up to $250,000 to BSI. In consideration,
IBS issued certain convertible preferred stock, which, after conversion
into BSI nonvoting common stock, represented 40% of BSI's outstanding
common stock. At December 31, 1996, the Company recorded its net book
value allocated to BSI of $166,667 as its investment. Also as part of
the amendment, remaining acquisition notes payable from the Company to
the founders of IBS in the amount of $250,000 were canceled, and the
remaining term of an earn-out plan to such founders was also canceled.
<TABLE>
<CAPTION>
Following is a summary of net goodwill write-off at June 30, 1997:
<S> <C>
Original value of goodwill $ 1,088,568
Addition to goodwill for cancelation of options per
earn-out agreement 195,313
Reduction to goodwill for write-off of debt (250,000)
Reduction to goodwill for net book value allocated to
investment for BSI (166,667)
------------
Remaining net goodwill written off $ 867,214
============
</TABLE>
In November 1997, new investors of BSI agreed to purchase the preferred
shares owned by the Company for $415,000 in cash and the assumption of
certain liabilities of $93,892. This transaction was completed in
January 1998. In addition, the Company also received $80,000 from
another investor from the sale of a fully reserved note receivable
related to BSI. A recap of the total consideration shown in the fiscal
1998 financial statements is as follows:
Cash proceeds $ 415,000
Assumption of debt 93,892
Note settlement 80,000
----------
Net proceeds and consideration 588,892
Net book value of investment 166,667
----------
Gain on sale of investment $ 422,225
==========
Continued
F-9
<PAGE>
EDNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
------------
2. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of the
Company's wholly owned subsidiaries EDN and IBS. Material inter-company
transactions and balances have been eliminated.
Revenue Recognition
A significant component of revenues relate to the sale of equipment
which is recognized when the equipment is installed. Installation fees
are recognized when the installation has been completed and usage fees
are recognized over the period the equipment is used based on the
relative usage level. Deferred revenues represent billings in excess of
revenue recognized.
Allowance for Doubtful Accounts
Bad debts are provided on the allowance method based on historical
experience and management's evaluation of outstanding accounts
receivable.
Inventories
Inventories are valued at the lower of cost or market with cost being
determined on the first-in, first-out basis.
Property and Equipment and Leasehold Improvements
Property and equipment are carried at cost and are depreciated on the
straight-line basis over their estimated useful lives, which range from
five to seven years. The costs of leasehold improvements are amortized
over the lesser of the length of the related leases or the estimated
useful lives of the assets. Expenditures for improvement or expansion
of property and equipment are capitalized. Repairs and maintenance are
charged to expense as incurred. When the assets are sold or retired,
their cost and related accumulated depreciation are removed from the
accounts with the resulting gain or loss reflected in the statement of
operations.
Advertising
Advertising costs are charged to operations as incurred. There were no
advertising expenses for the years ended June 30, 1998 and 1997.
Goodwill
Goodwill related to the acquisition of IBS was originally amortized
using the straight-line method over the estimated useful life of five
years. The Company evaluated the recovery of its goodwill by comparing
the aggregate estimated cash flows generated by those assets with their
carrying value. The carrying value exceeded the aggregate cash flow
amount, and goodwill was written off accordingly.
Continued
F-10
<PAGE>
EDNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
------------
2. Summary of Significant Accounting Policies, continued
Income Taxes
The Company accounts for income taxes using the liability method.
Deferred income tax assets and liabilities are computed annually for
differences between the financial reporting and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the
future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets
to the amount expected to be realized.
Fair Value of Financial Instruments
The carrying amounts of certain financial instruments, including cash,
accounts receivable, notes receivable, accounts payable, accrued
expenses, notes payable, and line of credit, approximate fair value as
of June 30, 1998 and 1997 because of the relatively short-term maturity
of these instruments.
Accounting for the Impairment of Long-Lived Assets
Long-lived assets such as intangible assets and property and equipment,
are evaluated for impairment when events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable
through the estimated undiscounted future cash flows from the use of
these assets. When any such impairment exists, the related assets will
be written down to fair value. This standard had no material effect on
the financial statements for 1998. Except as explained in Note 1, the
Company wrote off goodwill of $867,213 in 1997.
Use of Estimates
The preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Among the more significant
estimates included in these consolidated financial statements are the
estimated allowance for doubtful accounts receivable and the deferred
tax asset valuation allowance. Actual results could differ from those
and other estimates.
Accounting for Stock-Based Compensation
The Company accounts for its stock option awards under the intrinsic
value based method of accounting prescribed by Accounting Principles
Board Opinion No. 25, Accounting for Stock issued to Employees. Under
the intrinsic value based method, compensation cost is the excess, if
any, of the quoted market price of the stock at the grant date or other
measurement date over the amount an employee must pay to acquire the
stock. The Company makes pro forma disclosures of the net income and
earnings per share as if the fair value based method of accounting had
been applied as required by statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation. (Note 10).
Continued
F-11
<PAGE>
EDNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
------------
2. Summary of Significant Accounting Policies, continued
Earnings (Loss) per Share
The Company adopted Statement of Financial Accounting Standard No. 128
(FAS 128), Earnings per Share, during the year ended June 30, 1998.
There is no effect of FASB #128 on prior financial statements.
Earnings (loss) per share has been calculated using the weighted
average number of shares outstanding for the period, which were
7,936,358 for 1998 and 4,979,156 for 1997. Common stock equivalents
(stock options and warrants) have been excluded from the calculation
because they are anti-dilutive.
New Accounting Standards Not Yet Adopted
In June 1997, the Financial Accounting Standards Board issued a new
disclosure standard, SFAS No. 130, Reporting Comprehensive Income,
which establishes standards for the reporting and displaying of
comprehensive income, its components, and accumulated balances.
Comprehensive income is defined to include all changes in equity except
those resulting from investments by owners and distributions to owners.
Among other disclosures, SFAS No. 130 requires that all items that are
required to be recognized under current accounting standards as
components of comprehensive income be reported in a financial statement
that is displayed with the same prominence as other financial
statements. This new standard is effective for financial statements for
periods beginning after December 15, 1997 and requires comparative
information for earlier years to be restated. This standard is not
expected to materially impact the Company's disclosures when it is
adopted.
In 1997, the FASB issued a new disclosure standard, SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information,
which establishes standards for the reporting and displaying of
operating business segments. The statement defines operating segments
operating as distinct revenue-producing components of the enterprise
about which separate financial information is produced internally and
whose operating results are regularly reviewed by the enterprise. This
new standard is effective for financial statements for periods
beginning after December 15, 1997. The Company is currently reviewing
the impact of this new disclosure of its financial statements.
Reclassification
Certain reclassifications have been made to the prior year financial
statements in order for them to conform to the current-year
presentation.
Continued
F-12
<PAGE>
EDNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
------------
3. Accounts Receivable
Accounts receivable at June 30, 1998 and 1997 comprise the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Receivables $ 444,243 $ 379,529
Rebillable charges 44,600 97,467
---------- ----------
488,843 476,996
Less allowance for doubtful accounts (17,502) (31,875)
---------- ----------
Total $ 471,341 $ 445,121
========== ==========
</TABLE>
Allowances are made as a percentage of sales adjusted annually based upon
review of the individual accounts receivable. Accounts are written off
when deemed to be worthless. Total bad debt expense was $1,501 and
$13,706 for the years ended June 30, 1998 and 1997, respectively.
4. Note Receivable-Related Party
Secured note receivable at the face value of $283,746 due from Visual
Data Corporation is part of the payment resulting from VDC's investment
(Note 1). Principal of $56,749 plus interest is due annually commencing
July 1, 1999 until July 1, 2003; the note bears a fixed interest rate of
7% per annum.
5. Property and Equipment
Property and equipment are summarized by major category as follows as
of June 30:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Network and related equipment $ 881,473 $ 854,383
Furniture and fixtures 234,984 245,963
Computer software 16,802 7,954
Leasehold improvements 26,183 26,183
----------- -----------
Subtotal 1,159,442 1,134,483
Depreciation and amortization (767,961) (577,950)
----------- -----------
Property and equipment, net $ 391,481 $ 556,533
=========== ===========
</TABLE>
Depreciation and amortization included in the statements of income
amounted to $199,458 and $187,816 for the years ended June 30, 1998 and
1997, respectively.
The Company leases some equipment to customers under terms that are
accounted for as operating leases. Under the operating method, rental
revenue from leases are recognized ratably over the life of the lease
and the related equipment is depreciated over its estimated useful life.
Continued
F-13
<PAGE>
EDNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
------------
6. Notes Payable
<TABLE>
<CAPTION>
Notes payable consist of the following as of June 30, 1998 and 1997:
1998 1997
---- ----
<S> <C> <C>
Notes payable to an outside investor totaling $200,000. The notes bear
no interest and are uncollateralized. The repayment of these notes
was disputed by the Company and in 1998, when the debt could no
longer be legally collected, the notes were written off. - $ 200,000
Senior notes payable to Morgan Fuller Capital Group LLC with interest
at 18% per annum. The original amounts were $500,000, $300,000, and
$200,000. The Company repaid $100,000 in February 1997. The notes
are collateralized by the Company's assets. The balance was settled
and repaid in 1998 (Note 1). - 900,000
Notes payable to Mr. Irawan Onggara, a shareholder and financial
advisor, with original amounts of $250,000, $100,000, and $75,000 at
7% interest rate, collateralized by assets of the Company
subordinated to equipment covered by individual capital leases, due
August 8, 1996, October 18, 1996, and November 20, 1996,
respectively. The balance plus accrued interest of $35,000 was
converted to 1,000,000 shares of the Company's common stock and
warrants to purchase an additional 1,000,000 shares at $.375. - 340,000
--------- ------------
- 1,440,000
Notes payable-related party to an officer and employees, interest at 6%
per annum, uncollateralized. Accrued interest payable as of June 30,
1998 is $13,293. $ 40,500 55,500
--------- ------------
$ 40,500 $ 1,495,500
========= ============
</TABLE>
The related party notes payable are overdue as of October 21, 1996. The
payee has agreed not to declare a default under these notes for an
indefinite period and to accept repayment by the Company at a future
date.
The carrying value of these financial instruments approximates fair
value due to the relatively short maturity.
7. Line of Credit
The Company has a line of credit of $10,000 with a financial
institution, of which $8,872 and $9,627 was outstanding as of June 30,
1998 and 1997, respectively. It bears interest at 15.25% as of June 30,
1998.
The Company's wholly owned subsidiary IBS had a $25,000 line of credit
with a financial institution. The line of credit was terminated in
January 1998.
Continued
F-14
<PAGE>
EDNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
------------
8. Income Taxes
The provision for income taxes consists of currently payable California
franchise taxes of $2,400.
A reconciliation of the expected and reported provision for income
taxes follows:
<TABLE>
<CAPTION>
Year Ended June 30
------------------
1998 1997
---- ----
<S> <C> <C>
Benefit (provision) expected based on federal
statutory rate 34.0% 34.0%
State taxes, net of federal benefit 6.1 6.1
Valuation allowance, net (40.2) (40.2)
------- ------
Net income tax provision 0.1% 0.1%
======= ======
</TABLE>
Although the Company has Federal and California loss carryforwards
totaling approximately $6.1 million and $2.6 million, the utilization of
these net operating loss carryforwards is limited due to a change of
ownership as defined in the Internal Revenue Code. As a result, the
federal NOL can be utilized at the rate of $68,000 a year through 2013.
The state NOL can be utilized at the rate of $68,000 a year through 2003.
The tax effects of significant temporary differences representing
deferred tax assets as of June 30 are as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
Federal State Federal State
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total operating loss carryforwards $ 6,090,000 $ 2,673,000 $ 6,608,000 $ 3,304,000
Less amount that cannot be utilized (5,070,000) (2,333,000) (3,488,000) (2,264,000)
------------ ------------ ------------ ------------
Net operating loss carryforwards 1,020,000 340,000 3,120,000 1,040,000
Property and equipment 23,800 4,300 23,800 4,300
------------ ------------ ------------ ------------
Total deferred items 1,043,800 344,300 3,143,800 1,044,300
Tax rate, net 34.0% 6.1% 34.0% 6.1%
------------ ------------ ------------ -------------
Tax-deferred asset 355,000 21,000 1,070,000 64,000
Valuation allowance (355,000) (21,000) (1,070,000) (64,000)
------------ ------------ ------------ ------------
Net deferred tax asset - - - -
============ ============ ============ ============
</TABLE>
Continued
F-15
<PAGE>
EDNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
------------
9. Lease Commitments
As of June 30, 1998, the Company leases office space and certain
equipment under various noncancelable capital and operating leases. The
leases begin to expire in March 2000. Future minimum lease payments
required under the noncancelable leases are as follows:
<TABLE>
<CAPTION>
Operating Capital
Year Ending June 30: Leases Leases
----------- ---------
<S> <C> <C> <C>
1999 $ 176,517 $ 13,824
2000 157,277 10,106
2001 99,557 -
2002 99,557 -
2003 99,557 -
--------- -------
Total minimum lease payments $ 632,465 23,930
=========
Less amount representing interest 3,172
-------
Present value of net minimum lease payments 20,758
Less current portion 9,288
-------
Long-term portion $11,470
=======
</TABLE>
As of June 30, 1998, the Company has equipment purchased under
noncancelable capital leases with a cost of $76,990 and accumulated
amortization of $37,649.
Total rental expense for all operating leases for the years ended June
30, 1998 and 1997 amounted to $195,925 and $192,509, respectively.
10. Options and Warrants
Nonqualified Options to Key Employees and Directors-September 19, 1995
Plan
On September 19, 1995, EDN granted a total of 263,420 non-qualified
options to certain employees and directors to purchase shares in EDN at
$.10 per share. As a result of the recapitalization discussed in Note
1, the EDN options were converted into options to purchase the
Company's stock at a conversion of .87495 per share for each EDN share.
As a result, at June 30, 1998, there were 230,479 options outstanding
at a price of $.11 per share. These options expire on September 19,
2000. There were no options exercised during the period.
Nonqualified Stock Options-November 10, 1995 Plan
On November 10, 1995, the Company adopted a nonstatutory stock option
plan whereby 565,000 shares of the Company's common stock was reserved
for issuance. Under the terms of the plan, the options must be granted
prior to December 31, 1996; the price shall be determined by the
Company's Compensation Committee (CC); the period of option shall not
exceed five years from the date of grant; and the option must be paid
in cash when exercised unless a payment plan is authorized by the CC.
As of June 30, 1998, 74,500 options were outstanding at $1.25 per
share.
Continued
F-16
<PAGE>
EDNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
------------
10. Options and Warrants, continued
Incentive Stock Options
On April 3, 1998, the Company established another Stock Option Plan for
its employees, board members, and certain other consultants in order to
motivate them to maintain their commitment to the Company at this stage
of development. The Plan allows the Company to grant incentive or
nonqualified options up to three million (3,000,000) shares of common
stock. As of June 30, 1998, incentive stock options to purchase
2,041,500 shares were outstanding at an exercise price of $0.10 per
share. These expire five years from the date of grant.
Warrants to Note-holders
In May 1996, the Company entered into an investment banking
relationship with Morgan Fuller Capital Group (Morgan). Under the terms
of the agreement, Morgan will provide the Company with financial
advisor services as well as arranging for equity and debt funding. A
series of senior notes were issued and the note-holders received
warrants totaling 432,600 shares. The warrants entitle the holders to
purchase shares of the Company's common stock at a price of $0.25 per
share to be exercised prior to June 2003.
Warrants to Shareholders
As described in Note 1, on August 26, 1996, the Company, pursuant to
the Regulation D offering, issued 317,143 warrants at an exercise price
of $2.50 per warrant.
As discussed in Note 1, the Company renegotiated the exercise price to
$.10 on 738,000 warrants in exchange for the investor removing the
antidilution clause.
As the result of the debt restructuring discussed in Note 6, the
Company gave the note-holder 1,000,000 warrants at an exercise price of
$.375.
Warrants to Consultants
Pursuant to a Consulting Agreement dated June 16, 1998, between the
Company and McKenzie Shea, Inc., the Company granted warrants to
purchase 750,000 shares of common stock at $0.145 per share (see Note
1). The warrants shall expire five years after their issuance.
Continued
F-17
<PAGE>
EDNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
------------
10. Options and Warrants, continued
A recap of the options and warrants outstanding as of June 30, 1998,
1997, and 1996 is as follows:
<TABLE>
<CAPTION>
June 30, 1998: Quantity Reserved Outstanding Price
----------------- ----------- -----
<S> <C> <C> <C>
Options:
Nonqualified September 15, 1995 Plan 230,479 230,479 $.11
Nonqualified November 10, 1995 Plan 74,500 74,500 1.25
Employee Incentive Stock Option Plan and
Nonstatutory Stock Option Plan dated
April 3, 1998 3,000,000 2,041,500 .10
VDC mirror options 3,304,979 3,304,979 .10
---------- -----------
Total options 6,609,958 5,651,458
---------- -----------
Warrants:
Regulation D warrants, June 1996 317,143 317,143 $2.50
Senior note warrants, November 1996 432,600 432,600 .25
Regulation D warrants, July 1997 738,000 738,000 .10
Conversion of notes, August 1997 1,000,000 1,000,000 .375
Investment banking warrants, June 1998 750,000 750,000 .145
VDC mirror warrants 3,237,743 3,237,743 .10
---------- -----------
Total warrants 6,475,486 6,475,486
---------- -----------
Total warrants and options 13,085,444 12,126,944
========== ===========
June 30, 1997:
Options:
Nonqualified September 15, 1995 plan 230,479 230,479 $.11
Nonqualified November 10, 1995 plan 565,000 556,667 1.25
Century Financial Partners options 805,000 - 1.25
---------- -----------
Total options 1,600,479 787,146
========== ===========
Warrants:
Morgan warrants 367,568 367,568 1.50
Senior notes warrants 65,032 65,032 2.68-3.69
Regulation D warrants 317,143 317,143 2.50
---------- -----------
Total warrants 749,743 749,743
========== ===========
June 30, 1996:
Options:
Employee EDN options converted 230,479 230,479 $.11
Employee incentive options 500,000 500,000 1.25
Nonstatutory options 565,000 272,000 1.25
--------- ----------
Total options 1,295,479 1,002,479
========= ==========
Warrants:
Employee warrants 303,908 303,908 $3.00
Morgan warrants 250,000 250,000 6.37
--------- ----------
Total warrants 553,908 553,908
========= ==========
</TABLE>
Continued
F-18
<PAGE>
EDNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
------------
10. Options and Warrants, continued
Statement of Financial Standards No. 123, Accounting for Stock-based
Compensation (SFAS 123), requires the Company to provide pro forma
information regarding net income and net income per common share as if
compensation costs for the Company's stock option plans had been
determined in accordance with the fair value method described in SFAS No.
123. Had compensation expense been recorded under the provisions of SFAS
No. 123, the impact on the Company's net income and earnings per share
would have been:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Reported net earnings (loss) $ 518,136 $ (4,269,547)
Pro forma compensation expense, net of tax - -
---------- -------------
Pro forma net earnings (loss) $ 518,136 $ (4,269,547)
========== =============
Pro forma earnings (loss) per share-basic and diluted $ 0.065 $ (0.857)
========== =============
</TABLE>
The fair value of each option granted is estimated on the date of the
grant using the Black & Scholes option pricing model with the following
weighted average assumptions: dividend yield 0.00%, risk-free interest
rate of 5.52%, an expected life of options of three years for five-year
options, and a volatility of 227.9% for all grants.
11. Earnings (Loss) Per Share
The calculation of basic earnings per share and fully diluted earnings
per share is the same for 1998 and 1997. A recap of earnings (loss) per
share for the years ended June 30, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Earnings (loss) per common share:
Income from operations before extraordinary items $ (0.024) $ (0.857)
Extraordinary items 0.089 -
-------- ---------
Net income (loss) $ 0.065 $ (0.857)
======== ========
</TABLE>
12. Employment Contracts
The Company and its subsidiaries have entered into employment contracts
with several of their key employees that expire at different times
through December 31, 2000. At June 30, 1998 the commitment under all of
the contracts was approximately $1,050,000.
13. Concentration of Credit Risk
The Company and its subsidiaries maintain cash in bank deposit accounts
at accredited financial institutions. The balances in these accounts may,
at times, exceed federally insured limits.
Continued
F-19
<PAGE>
EDNET, INC.
NOTES TO CONSOLIDATED STATEMENTS, Continued
------------
14. Supplemental Disclosures of Noncash Investing and Financing Activities
The following noncash activity occurred during the periods under audit
as follows:
For fiscal year 1998:
The Company issued 569,954 of its shares of common stock in
consideration for consulting services performed. At the time of
issuance these shares were valued at $421,244.
The Company issued 1,000,000 common shares to a note-holder (see Note
6) in exchange for the cancelation of the note of $340,000 and
accrued interest of $35,000.
As part of the VDC investment (see Note 1) the Company received
shares and warrants in VDC and a note receivable from VDC in the
amount of $283,746. The shares and warrants in VDC worth $418,250
were used to settle a note payable.
Cash paid during the year for interest was $97,193. Cash paid during
the year for taxes was $2,400.
For fiscal year 1997:
The Company issued 500,000 shares of its common stock in
consideration for consulting services. These shares were valued at
$652,500.
The Company issued 65,000 shares of its common stock in exchange for
the cancelation of $50,000 of debt.
The Company issued 125,000 shares of its common stock valued at
$195,313 for consideration of the IBS earn-out agreement.
Cash paid during the year for interest was $113,563. Cash paid during
the year for taxes was $3,268.
15. Contingency
The State Board of Equalization is auditing the Company's sales and use
tax liability for the period from July 1, 1994 through June 30, 1997. A
determination of any additional liability will be made by August 24,
1998. The Company is unable to determine the extent of loss, if any.
However, an accrual in the amount of $30,000 has been recorded on the
financial statements for the year ended June 30, 1998 and 1997.
F-20
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES, INC.
INTRODUCTION TO
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following Unaudited Condensed Consolidated Pro Forma Statements of
Operations for the year ended September 30, 1997 and the nine months ended June
30, 1998 reflect adjustments to Visual Data Corporation's results of operations
to give effect to the transaction discussed below as if such transaction had
occurred at the beginning of the period presented. This transaction was
effective June 20, 1998 and accordingly, has been reflected in the consolidated
balance sheet as of June 30, 1998 as filed in Visual Data Corporation's 10-QSB
covering that period.
Pursuant to the Securities Purchase Agreement between Visual Data Corporation
("VDC") and EDnet, Inc., VDC purchased 8,563,417 shares of EDnet, Inc. common
stock constituting 51% of the outstanding common stock of EDnet, Inc. for
consideration of $1,400,000. VDC was also granted up to 6,542,722 options to
acquire, at the exercise price of $0.10 per share, the number of shares actually
purchased upon exercise of each option, warrant and other convertible securities
("Outstanding Option") of EDnet, Inc. outstanding at the closing date. VDC's
rights to effect such exercise shall accrue on the date of exercise of the
corresponding Outstanding Option and shall expire upon the first anniversary of
the exercise date of such Outstanding Option.
F-21
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Business
Acquired Pro Forma as
Visual Data ---------------- Acquisition Adjusted For
Corporation EDnet, Inc. Adjustments Acquisition
----------- ---------------- ----------- ------------
<S> <C> <C> <C>
Revenue:
Equipment sales $ 47,550 $ 689,513 $ $ 737,063
Installation and monthly fees 29,550 428,458 458,008
Usage fees 78,755 1,141,965 1,220,720
Web design and consulting 86,730 554,472 641,202
Marketing fees 496,582 496,582
Rental fees and other 5,965 86,502 92,467
------------- ------------- ------------ --------------
Total revenue 745,132 2,900,910 3,646,042
Cost of Sales 123,705 1,925,689 2,049,394
Sales, marketing & administrative 2,578,571 1,195,938 55,334 (1) 3,829,843
------------- ------------- ------------- --------------
Total operating costs 2,702,276 3,121,627 55,334 5,879,237
------------- ------------- ------------- --------------
Loss from operations before other
income (expense) and provision
for income taxes and extraordinary
item (1,957,144) (220,717) (55,334) (2,233,195)
Other income (expenses)
Interest income 59,854 59,854
Rental income 60,979 60,979
Interest expense (69,447) (51,538) (120,985)
Gain (loss) on sale of equipment 3,160 3,160
Gain on sale of investment 422,225 422,225
Forgiveness of debt 200,000 200,000
Minority interest (3,021) (519,997) (2) (523,018)
------------- ------------- ------------- --------------
Total other income (expense) 48,365 573,847 (519,997) 102,215
------------- ------------- ------------- --------------
Loss before provision for income
taxes and extraordinary item (1,908,779) 353,130 (575,331) (2,130,980)
Provision for income taxes 2,401 2,401
------------- ------------- ------------- --------------
Loss before extraordinary item (1,908,779) 350,729 (575,331) (2,133,381)
Extraordinary item-gain on restructuring of
debt 710,489 710,489
------------- ------------- ------------- --------------
Net income (loss) $ (1,908,779) $ 1,061,218 $ (575,331) $ (1,422,892)
============= ============= ============= ==============
Weighted average of shares outstanding 3,127,407 3,202,407
============= ==============
Loss per Share - Basic and Diluted $ (0.61) $ (0.44)
============= ==============
</TABLE>
F-22
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Business
Acquired Pro Forma as
Visual Data --------------- Acquisition Adjusted For
Corporation EDnet, Inc. (3) Adjustments Acquisition
----------- --------------- ----------- -----------
<S> <C> <C>
Revenue:
Equipment sales $ $ 961,677 $ $ 961,677
Installation and monthly fees 541,856 541,856
Usage fees 1,305,992 1,305,992
Web design and consulting 862,525 862,525
Marketing fees 193,038 193,038
Rental fees 117,993 117,993
Other 17,327 17,327
------------ ------------ ------------ -------------
Total revenue 193,038 3,807,370 - 4,000,408
Cost of Sales 2,277,118 2,277,118
Research and development 1,017,233 1,017,233
Sales, marketing & administrative 2,748,921 3,765,904 73,779 (1) 6,588,604
------------ ------------ ------------ -------------
Total operating costs 2,748,921 7,060,255 73,779 9,882,955
------------ ------------ ------------ -------------
Loss from operations (2,555,883) (3,252,885) (73,779) (5,882,547)
Other income (expenses)
Interest income 30,403 1,837 32,240
Interest expense (1,042,227) (147,166) (1,189,393)
Loss on disposal of equipment (6,255) (853) (7,108)
Write off of good will (867,214) (867,214)
Minority interest 2,092,078 (2) 2,092,078
------------ ------------ ------------ -------------
Total other income (expense) (1,018,079) (1,013,396) 2,092,078 60,603
------------ ------------ ------------ -------------
Loss before provision for income taxes (3,573,962) (4,266,281) 2,018,299 (5,821,944)
Provision for income taxes 3,266 3,266
------------ ------------ ------------ -------------
Net loss $ (3,573,962) $ (4,269,547) $ 2,018,299 $ (5,825,210)
============ ============ ============ =============
Weighted average of shares outstanding 2,509,249 2,584,249
============ =============
Loss per Share - Basic and Diluted $ (1.42) $ (2.25)
============ =============
</TABLE>
F-23
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIAIRES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Represents the amortization of the excess of purchase price over net assets
acquired of $1,106,688 amortized over a fifteen (15) year life.
(2) Represents the minority interest share of EDnet, Inc. net income.
(3) EDnet Inc. has a fiscal year end of June 30. The amounts included in
these financial statements are for the nine months ended June 30, 1998
and the year ended June 30, 1997.
F-24
<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 hereunto duly authorized.
Date: October 7, 1998 By:/s/ Randy S. Selman
-------------------------------
Randy S. Selman, President
F-25
