U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission file number 000-22849
Visual Data Corporation
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(Name of small business issuer in its charter)
Florida
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(State or other jurisdiction of incorporation or organization)
65-0420146
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(I.R.S. Employer Identification No.)
1291 SW 29 Avenue, Pompano Beach, FL 33069
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(Address of principal executive offices)(Zip Code)
Issuer's telephone number 954-917-6655
Securities registered under Section 12(b) of the Exchange Act:
none
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(Title of each class)
Name of each exchange on which registered
not applicable
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Securities registered under Section 12(g) of the Exchange Act:
Common Stock
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Redeemable Common Stock Purchase Warrants
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(Title of Class)
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [x]
No [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [x]
State issuer's revenues for its most recent fiscal year. $ 193,038 for
the 12 months ended September 30, 1997.
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days. The aggregate market value of the voting stock held by
non-affiliates computed at the average price for which the Company's common
stock was sold on January 12, 1998 is approximately $5,008,282.
State the number of shares outstanding of each of the issuer's class of
common equity, as of the latest practicable date. As of December 31, 1997,
3,082,150 shares of Common Stock are issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB into which the document
is incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) of
the Securities Act of 1933 ("Securities Act"). Not Applicable.
Transitional Small Business Disclosure Form (check one):
Yes No X
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PART I
Item 1. Description of Business
General
Visual Data Corporation, a Florida corporation (the "Company") was formed in May
1993 with the goal of becoming the predominant digital multi-media content
provider in the advertising industry. In August 1997, one year after exiting
from its development stage activities, the Company completed its initial public
offering. As used herein, the Company includes HotelView Corporation, a Florida
corporation ("HVC") incorporated in September 1993, CareView Corporation, a
Florida corporation ("CareView") incorporated in August 1997 and CondoView
Corporation, a Florida corporation ("CondoView") incorporated in January 1998,
all of which are wholly-owned subsidiaries of the Company.
The Company develops digital multi-media libraries of interactive visual
information which can be marketed and distributed through a variety of media,
including the Internet, other On-line services, laser disc, DVD and, eventually,
Interactive Television ("ITV"). Much like a magazine selling advertising space,
the Company generates revenues through fees paid by companies which advertise
and showcase their products in one of the Company's innovative multi-media
libraries, each of which are targeted to a specific industry, such as travel,
health care and interval ownership. Each of the libraries, or "Views," are
essentially marketing companies designed to distribute advertising over new,
non-traditional media, supplementing traditional advertising mediums such as
print, television and radio. Unlike traditional advertising which is essentially
passive, the use of non-traditional media should, in management's opinion, allow
the Company's messages to have greater impact and higher recall because of the
active interface between the advertiser and the consumer and the proactive
nature of the medium. The ability of the product to be revisited at the
consumer's discretion, combined with the detail of the message provided by the
video, will also permit a more aggressive promotion by the advertiser (the
Company's client) by allowing the client the opportunity to supplement their
traditional advertising, broaden reach and frequency, and, hopefully, improve
market position.
As discussed above, the Company's libraries will be offered to the general
public through various media. The Company's first library, HotelView(R), is a
visual library of hotels and resorts, including nearby services and attractions
which was initially available through a travel agency distribution channel
developed by the Company and since November 1997 on the Internet at the
Company's web site www.hotelview.com. Additional libraries which possess certain
synergies to HotelView(R), including CruiseView(TM), AdventureView(TM) and
ConventionView(TM) will be offered through the travel agency distribution
channel and the Internet as these libraries are developed. The Company currently
has 11 additional libraries in various stages of development, including
CareView(TM) and CondoView(TM) which the Company expects to debut in fiscal
1998. Management of the Company currently anticipates that many of the Company's
other libraries, such as MedicalView(TM),
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CampusView, Health and FitnessView(TM) and ProductView(TM), will be fully
developed and launched as soon as high speed data transmission capability, such
as cable modems, is widely available. The Company owns, or in the case of
libraries under development will own, all of the content included in its
libraries.
Consumers today are accustomed to television, a visual medium of full-motion,
full-color video that is sound enhanced and readily available to every
consumer's home or business. On-line computer users are accustomed to TV-like
monitors and displays providing access to graphics and text databases on every
topic imaginable through service providers that make connections to these
databases affordable and easy. Computers outsold television sets in 1995 for the
first time in history. The combination of accessible, indexed, on-line
information in full-motion, full-color video forms the basis and the requirement
for multi-media Internet capability or ITV. Beginning in 1997, certain
technological advancements, including cable modems, digital satellite and high
speed wireless modems, began to become available to consumers. These
advancements will enable suppliers and users of the Internet to access
multi-media information efficiently. Management of the Company believes content
such as that offered by the Company will become increasingly more in demand to
fill voids created by the expanded capacity these new technologies provide.
In the opinion of management, the current demographics of the Internet consumer
offers the Company a very favorable platform for using the Company's products
and services to advertise and promote client products and services. For
instance, according to Nielsen Media and the U.S. Census Bureau, it is currently
estimated there are 50,000,000 Internet users worldwide, of which 30,000,000 are
in the United States. The total number of worldwide users is expected to reach
200,000,000 by the end of 1998. Current statistics reflect that total Internet
advertising revenues in 1996 were approximately $267 million, with only 38% of
those advertising dollars spent on computer products. By the year 2000, it is
estimated that 41% of Internet commerce will be travel related, one reason the
Company chose HotelView(R) as its first library. Of the people on-line, the
average annual income is $72,000 (compared to $32,000 nationwide), 25% generate
income of at least $80,000 annually and 50% are professional or managerial.
Further, there has been a notable increase in on-line purchasing, having
increased from 19% in 1995 to 27% in 1997. A survey by the Emerging Technologies
Research Group revealed that 39% of users who have made purchases on-line
reviewed on-line advertising prior to purchasing.
The HotelView(R) Library
The HotelView(R) Library, which contains short, concise visual brochures
("vignettes") depicting the specific characteristics and amenities of hotels and
resorts in full-motion video, is being marketed to hotels and resorts that pay
an annual subscription fee to be included in the library. The HotelView(R)
Library on the Internet and in the travel agency network developed by the
Company currently includes 81 hotels and resorts across the United States, the
Caribbean and Europe. These include such well-know properties as the Arizona
Biltmore, Fountainbleau Hilton Resort & Towers, The Mirage, Treasure Island at
the Mirage, New York Hilton & Towers, The Hyatt Key West
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Boutique Resort & Marina, Turnberry Isle Resort & Club, The Ritz-Carlton Laguna
Niguel, Elbow Beach Bermuda, Pier House Resort & Caribbean Spa, Schlosshotel
Vier Jahreszeiten - Berlin and the Boca Raton Resort & Club.
All facilities included in the Hotel View(R) Library are videotaped in a uniform
manner following a format developed by the Company in order to maintain
consistency and quality. Hotel and resort management are not involved in the
development or content of the vignette except to verify accuracy, thereby
permitting the Hotel View(R) Library to be fair and consistent in its
presentation. Professionally videotaped with a voice narrative, the vignette
shows the features of the hotel, including rooms, conference facilities, lobby,
pool, restaurants, grounds, sports facilities, and spas. Information concerning
the location of the property relative to area attractions and airport facilities
is also provided.
The HotelView(R) Library is marketed to hotels and resorts and serves travel
agencies, travel sites on the Internet and, ultimately, potential travelers. By
inclusion in the HotelView(R) Library, a hotel reaches thousands of travel
agents and potential guests through a convenient, low cost, and effective
method. The Company's HotelView(R) Library was initially distributed on laser
discs to its travel agency network. Following the closing of the Company's
initial public offering, the HotelView(R) Library is now also available in
full-motion video on the Internet at the Company's HotelView(R) website,
www.hotelview.com. As high speed access, such as cable modems and digital
satellite technology, becomes more readily available, the Company plans to
distribute its client vignettes through its single video storage location (file
server) which will be connected to the Internet and linked to all major travel
related websites. In this arrangement, Internet users visiting a travel website,
such as TravelWeb(TM) (www.travelweb.com) can make airline reservations, select
a hotel, see the HotelView(R) video and book the hotel without leaving the
travel services' website.
Additional Libraries Under Development
Management of the Company believes that as a result of the rapid development of
high speed data transmission capability (such as cable modems) as well as new
high speed file transfer technology which permits consumers to view on-line
information in full-motion, full-color video, an increasing demand for high
quality video content will continue to grow. To fill this perceived demand for
additional information, the Company is developing the infrastructure to add
additional libraries to present the advertising for a broader range of travel
related products and services as well as libraries of products and services for
other non-travel industries, such as health, education, and durable and
non-durable goods. While the Company anticipates most of these future libraries
will be available over the Internet, some, such as CareView(TM) may be better
suited to distribution through non-public, member only electronic data delivery
meda much the same as the travel agency distribution channel in use by
HotelView(R). Accordingly, like HotelView(R), these additional libraries will
not be collectively dependent on the technological architecture of a single
media service (Internet, On-line service, ITV, Intranet, DVD, etc) but will be
developed in order to take advantage of the medium or media that maximize the
delivery of the message to the targeted audience.
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The following are examples of the libraries already in concept and/or final
development stages by the Company.
* CareView(TM)--A library of nursing homes, adult care centers and
rehabilitation facilities.
* CondoView(TM)--A collection of time share residences in connection
with other marketing partners in the interval ownership business.
* CruiseView(TM)--A visual database of top cruise ships and port-of-call
facilities.
* AttractionView(TM)--A visual database of attractions and services
located at destinations where the Company has hotel properties included
in the HotelView(R) Library. It is anticipated the Company will also
earn additional revenues through prospects viewing the featured
attractions which are presented via the Company's media distribution
channels.
* AdventureView(TM)--A collection of advertisements of exotic and
exciting client-managed vacations. Vignettes of unusual activities
ranging from rafting trips, safaris, mountain climbing, diving
expeditions and even hiking through the Amazon.
* CampView(TM)--A collection of video tours of seasonal camps, sports
camps and other types of campgrounds for children and adults.
* ConventionView(TM)--A visual library of convention centers and meeting
facilities.
* CampusView--A visual database of American colleges and universities.
Concise vignettes include tours of the school's facilities, special
program descriptions, and campus social life.
* Health & FitnessView(TM)--A collection of specific exercise videos. The
viewer can customize a workout by watching and selecting only the
exercise segments they need.
* MedicalView(TM)--Medical treatments are presented in-depth, in
easy-to-understand, comforting terms by the physician advertising his
or her speciality.
* ProductView(TM)--A collection of advertisements of consumer products
presented in a format enabling consumers to review each item's features
and capabilities in more depth than available via traditional media.
Selected manufacturer's entire lines, in every model and color, will be
shown. Full-motion instructional information can be included on
products requiring assembly.
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. In conjunction therewith, the Company
is presently negotiating the terms and conditions
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which will permit it to acquire all rights and interests in four software
products from Digital Criteria Search Technologies, Inc., together with certain
computer hardware and software related thereto, as well as exclusive worldwide
marketing rights for a multi-media dating service and a multi-media job
opportunity library to be available on the Internet. The Company has not
executed a definitive agreement for this acquisition and there are no assurances
the negotiations will result in terms and conditions which will permit the
Company to consummate this transaction.
Videotaping and Production
The Company's libraries are edited and produced in house. The on-site filming of
a property is handled by an international network of independent professional
camera crews in 40 states as well as Europe and Asia, cultivated over 13 years
by the Company's co-founder, Alan Saperstein, who was Executive
Director/Entertainment Division of NFL Films where he was responsible for
supervision of all projects, budgets, screens and staffing. See " Item 9.
Directors, Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act." These crews have been trained by the Company
to tape properties in an efficient and low cost manner. Once a site is filmed,
the Company's in-house production staff has been trained to create vignettes
from these tapes which conform in content, quality and duration.
The Company uses Media 100, a state-of-the-art non-linear video editing system,
as well as a digital sound editing system fully operational in its facility.
During the past few years, the advanced technology available through the use of
digital editing systems, such as the Company's, have significantly reduced both
the cost of the equipment as well as the post-production costs associated with
creating full-motion videos such as those which form the basis of the Company's
libraries. According to literature provided by Media 100 Inc. (Nasdaq: MDEA),
systems similar to those used by the Company are operated by nearly 10,000 users
worldwide, including a wide variety of companies such as Microsoft, Apple
Computers, Hanna Barbera, BBC, CBS, CNN, MTV, TCI Cable, Time Warner Cable,
Smithsonian Institution, DuPont, General Motors, Sega Enterprises, Warren Miller
Entertainment, the Central Intelligence Agency and the Los Alamos National Lab.
Editing equipment once costing close to $1 million per editing suite is being
replaced by digital editing systems such as those in use by the Company for less
than $200,000. According to management and based upon their previous experience,
the sophistication of the digital technology is reducing the post-production
time for similar type videos from as much as four days to as little as four
hours.
Acquisition of Internet Service Provider (ISP)
In November 1997 the Company acquired certain assets of Armigeron Information
Services, Inc. ("Armigeron"), including web servers with supporting network
infrastructure, and context sensitive web technology which allows for highly
complex interactive web site development. The purchase of the technology and
equipment enables the Company to operate its own proprietary Internet web sites
for use in distributing its full-motion videos via the Internet. The Company
also acquired
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Armigeron's Internet service business which included 31 clients for whom
Armigeron acted as a web site host, generating annual revenues of approximately
$100,000. In conjunction with the asset purchase, the Company and the principals
of Armigeron entered into a software development agreement for the development
of software which will allow the Company's full-motion video libraries to be
accessed and viewed on the Internet and provide for interactive links with other
related web sites that will offer access to and from the Company's sites as well
as various levels of access to the Company's video libraries for strategic
partners and clients. As a result of this agreement, since November 1997 end
users and end user suppliers (i.e., travel agents) have been able to access the
Company's HotelView(R) web site, www.hotelview.com, and benefit from the depth
of information presented in the full-motion video advertisement of the
participating hotels and resorts.
Strategic Alliances and General Marketing Strategies
Strategic Alliances
One of the Company's marketing strategies is to consider strategic alliances
with entities or groups which can assist the Company in its effort to develop
client contacts and media mechanisms for delivery of client messages to targeted
consumer markets. In this regard, the Company has already successfully
established relationships with prominent companies in the travel industry to
assist the Company in the marketing and distribution of the Hotel View(R)
Library to clients and end users.
The Company has entered into a two year agreement (the "Pegasus Agreement") with
Pegasus Systems, Inc. ("Pegasus") whereby Pegasus has agreed to use its
reasonable efforts to market, endorse and promote the Hotel View(R) Library to
each of its hotel clients and to obtain executed agreements from hotels for
inclusion in the Hotel View(R) Library. Pegasus has further agreed to link and
supply data for the all hotels within the HotelView(R) Library, thus enabling
the visitors to the Travelweb website (www.travelweb.com) to view HotelView
video vignettes . Pegasus will receive a commission of 20% on sales made for
initial contracts and 10% for renewals of contracts obtained by its efforts. The
Pegasus Agreement also gives Pegasus an option to purchase up to 331/3% of the
outstanding capital stock of HVC (currently a wholly-owned subsidiary of the
Company) based upon the number of contracts between Pegasus member-based hotels
and the Company. Specifically: at such time as the Company has entered into at
least 1,000 initial contracts with Pegasus member hotels, Pegasus has the option
to purchase up to 5% of HVC for $500,000 in cash; at such time as the Company
has entered into at least an additional 1,500 initial contracts with Pegasus
member hotels (for a total of 2,500 initial contracts) Pegasus has the option to
purchase up to an additional 10% of HVC for $1 million in cash; at such time as
the Company has entered into at least an additional 2,500 initial contracts with
Pegasus member hotels (for a total of 5,000 initial contracts), Pegasus has the
option to purchase up to an additional 10% of the Company for $1 million in
cash; and, finally, at such time as the Company has entered into at least an
additional 5,000 initial contracts with Pegasus member hotels (for a total of
10,000 initial contracts), then Pegasus has the option to purchase up to an
additional 8.3% of the Company for $833,333 in cash. Assuming all performance
levels were met by Pegasus, it would have the option to acquire 331/3% of HVC
for a total cash payment of $3,333,333.
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Marketing
The Company continues to target and establish relationships with major hotel
chains, travel agencies, travel associations and travel bureaus throughout the
United States, Canada, Europe and the Caribbean. While the Company has
established relationships with a number of the larger hotel chains such as
Hilton, Hyatt and SuperClubs, the Company is also focusing on lesser-known, but
high quality hotels and resorts who may not have the name recognition of the
larger chains and, thus, are often overlooked by travelers and travel
professionals. The immediate focus will be on three to five star hotels in the
top 25 leisure destinations to initiate market combination and control market
share of the video component on the Internet in these key global markets. HVC is
also in current negotiations with several of the largest and most well-known
reservation and representation companies in the industry to expedite the
solicitation process. There can be no assurances, however, that such
negotiations will lead to contracts or agreements. On the agency distribution
side, the Company has already established relationships with agencies that are
part of a number of the major consortiums, including American Express(R), VTS(R)
and Carlson(R), and will continue to focus and expand this "pull" side of the
business.
The Company has created a promotional video that demonstrates the operation of
the Hotel View(R) system. The video contains examples of hotel vignettes and
shows the benefits of the system to the traveler, travel agent and hotel and
resort operators. The video, along with various brochures, has been sent to the
targeted travel agencies representing a significant portion of the leisure
travel business. The Company has installed over 200 systems in travel agencies
nationwide to promote the program and test its operation.
To date, signed contracts with hotels for inclusion in the Hotel View(R) Library
have primarily resulted from the Company's direct sales group. Regional sales
representatives have canvassed primary U.S., Caribbean, and European leisure
destinations for the initial library. The Company has developed brochures,
marketing collaterals and demo videos to support the sales efforts.
The Company presently intends to utilize the HotelView(R) strategy in rolling
out various products and services in other vertical markets, i.e., the Company
will own the content and utilize a variety of media to distribute the
information to the targeted consumer market. The additional libraries will also
benefit from strategic alliances the Company will seek to form with partners in
these markets.
Competition
The Company is engaged in the business of presenting information (i.e.,
conveying messages) in a consolidated and organized fashion over non-traditional
media. As such, the Company must first educate clients and consumers that a need
exists, then educate them that the Company's products
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satisfy the need. As such, the Company may compete directly or indirectly with
many companies, a number of which are larger, better capitalized, more
established and have greater access to resources necessary to produce a
competitive advantage. However, the Company believes, but there can be no
assurances that, there are no competitors who have or are developing products
using the same strategic plan as the Company's, although many of the elements of
the Company's products may exist in different formats. Although clients may
undertake the production of a video advertisement of their product as a
marketing tool, the Company knows of no other company that is assembling and
distributing a library similar to the Company's Hotel View(R) Library.
Employees
The Company currently has 14 full-time employees and 2 part-time employee, of
which three are in executive management. The Company believes its employee
relations are good.
Item 2. Description of Property
In September 1997 following its initial public offering, the Company purchased
from an unaffiliated third party a 25,000 square foot facility in Pompano Beach,
Florida which now serves as the Company's corporate headquarters and houses all
of its production, marketing and distribution activities. The aggregate purchase
price paid for the facility was $1,475,000, comprised of $475,000 in cash and an
18 month first mortgage in the principal amount of $1,000,000, bearing interest
at the rate of 8.75% per annum, with 15 year amortization. At maturity on March
31, 1999, the amount due under the mortgage, which is held by an unaffiliated
financial institution, will be approximately $963,000. See Item 13(a), Exhibit
10(ii) hereto.
Item 3. Legal Proceedings
The Company is not a party to any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
On July 30, 1997 the Company's Common Stock and Warrants began trading on The
Nasdaq SmallCap Market(TM) ("Nasdaq") under the symbols VDAT and VDATW,
respectively. Prior to such date, there had been no market for the Company's
Common Stock. The following table sets forth the high and low closing or sale
prices of the Company's Common Stock for each quarter since the stock began
trading on July 30, 1997, and for the interim period from October 1, 1997
through December 31, 1997. The following quotations are over-the-market
quotations and, accordingly, reflect inter-
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dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.
Closing Price
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High Low
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July 30, 1997 through September 30, 1997 $6.00 $5.50
October 1, 1997 through December 31, 1997 $5.63 $2.38
On January 12, 1998, the closing bid price for the Common Stock was $2.25. As of
December 31, 1997 the approximate number of record holders of the Company's
Common Stock was 151. Management of the Company, however, believes there to be
in excess of 800 beneficial holders of the Company's Common Stock.
Dividend Policy
The Company has not paid any cash dividends on its Common Stock since its
inception. The Company presently intends to retain future earnings, if any, to
finance the expansion of its business and does not anticipate that any cash
dividends will be paid in the foreseeable future. Future dividend policy will
depend on the Company's earnings, capital requirements, expansion plans,
financial condition and other relevant factors.
Item 6. Management's Discussion and Analysis or Plan of Operation
The following discussion regarding the Company and its business and operations
contains "forward- looking statements" within the meaning of Private Securities
Litigation Reform Act 1995. Such statements consist of any statement other than
a recitation of historical fact and can be identified by the use of
forward-looking terminology such as "may," "expect," "anticipate," "estimate" or
"continue" or the negative thereof or other variations thereon or comparable
terminology. The reader is cautioned that all forward-looking statements are
necessarily speculative and there are certain risks and uncertainties that could
cause actual events or results to differ materially from those referred to in
such forward looking statements. The Company does not have a policy of updating
or revising forward-looking statements and thus it should not be assumed that
silence by management of the Company over time means that actual events are
bearing out as estimated in such forward looking statements.
PLAN OF OPERATIONS
The Company exited the development stage during the fourth quarter of fiscal
1996. During its development stage, the Company produced the initial installment
of vignettes included in the HotelView(R) Library. In November, 1997, Volume 2
of the HotelView(R) Library was distributed to the approximately 200 travel
agencies nationwide which comprise the equipped HotelView travel agency network.
Implementation of the Company's plan of operation is being funded by Company's
receipt of the net proceeds of approximately $4.8 million from its initial
public offering ("IPO") which closed August 4, 1997.
The Company's current plan of operation includes continuing to expand its base
of travel agencies 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, during the first quarter of fiscal 1998, acquired the
hardware and software necessary to link the Company to the Internet and provide
links to other websites. This was made possible by the acquisition of certain
assets of Armigeron Information Services, Inc. (see Description of Business -
Acquisition of Internet Service Provider) as well as two software development
agreements that were entered into by the Company; one with Advanced Media
Developers, Inc. and one with Cyber Publishing, Inc. The HotelView website
became operational in November, 1997 and management anticipates the Company's
Internet links to other websites will become operational during the second
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 twelve month period following the date of the
Company's IPO, management intends to expand the HotelView(R) Library as well as
complete initial volumes of the CondoView(TM), AttractionView(TM) and
CareView(TM) libraries. The Company, however, does not anticipate reporting
significant revenues from any of these libraries during fiscal 1998.
Revenues of $193,038 were recognized during fiscal 1997 based on the redemption
of room credit balances due to bookings made by the HotelView travel agency
network and tape sales to hotels. Interest expense increased approximately
$1,015,115 in fiscal 1997 versus 1996 primarily due to the non-cash amortization
of discounts on certain notes payable. Selling, general and administrative
expenses increased approximately 173% in fiscal 1997 versus 1996 and included
$690,000 of deferred costs which were charged to expense during fiscal 1997.
Both of these items are non-recurring and the Company does not anticipate
significant interest expense during fiscal year 1998. Through December 1997, the
Company offered 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 price due under a performance based arrangement. Because there
is no time limitation 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
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continue to bill and collect amounts due under this performance based
arrangement during fiscal 1998, any long term delay in or inability to collect
these amounts may have an adverse effect on the Company. Hotel contract renewals
are being billed on a cash basis and from January 1998 forward, the Company will
charge hotels and resorts an annual fee, payable in cash, for their inclusion in
the library as well as a charge per Internet site visit by potential hotel
guests.
The Company has currently 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 and will finalize development of its advertising campaign in the
second quarter of fiscal 1998.
The Company will seek 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. The immediate focus will be on highly regarded hotels in the top 25
leisure markets. On January 14,1997, the Company entered into a written
agreement with Pegasus Systems, Inc., whereby 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 HotelView(R) Library to
each of its hotel clients and to obtain executed agreements from hotels for
inclusion in the Library. Pegasus has further agreed to link and supply data for
the hotels in the current HotelView(R) Library to their website, Travelweb, one
of the world's premiere travel websites, thus enabling Travelweb visitors to
view HotelView video vignettes. Discussions with several other companies are
expected to, though there can be no assurance, result in marketing and sales
agreements during fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had $2,345,988 of working capital. From
inception through September 30, 1997, the Company's capital has been provided by
the sale of equity and debt instruments and shareholder loans. These funds have
been used for production, compensation, acquisition of equipment and general
operations of the Company during the development stage and the subsequent year.
Since the closing of its IPO in August, 1997, the Company has spent
approximately $1,040,000 on the repayment of debt and related interests,
$550,000 towards the purchase of its new building and related improvements in
Pompano Beach, Florida, and $160,000 on the acquisition of equipment and
technology, including an Internet file server.
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 and an additional
<PAGE>
Internet file server with significant capacity and memory to store a larger
library of video files. The Company has sufficient working capital to provide
for such acquisitions.
The Company has sufficient working capital to fund its current plan of
operations for the balance of fiscal 1998. In the event however, management
should determine to either accelerate their business plan or seek additional
acquisitions, the Company may be required to raise additional capital . There
are no assurances that such capital will be available to the Company on terms
and conditions it finds acceptable.
9
<PAGE>
Item 7. Financial Statements
The Company's financial statements are contained in pages F-2 through F-18 as
follows.
10
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
---------
Reports of Independent Certified Public Accountants F - 2
Consolidated Balance Sheets as of September 30, 1997 and 1996 F - 4
Consolidated Statements of Operations
for the Years Ended Septembe 30, 1997 and 1996 F - 5
Consolidated Statements of Stockholders Equity
for the Years Ended Septembe 30, 1997 and 1996 F - 6
Consolidated Statements of Cash Flows
for the Years Ended Septembe 30, 1997 and 1996 F - 7
Notes to the Financial Statements F - 9
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Visual Data Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheet of Visual Data
Corporation and Subsidiaries as of September 30, 1997, and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
year 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 audit.
We conducted our audit 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 significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Visual Data Corporation and
Subsidiaries as of September 30, 1997, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Miami, Florida,
December 10, 1997.
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors and Stockholders
Visual Data Corporation and Subsidiary
Boca Raton, Florida
We have audited the accompanying consolidated balance sheet of Visual Data
Corporation and Subsidiary as of September 30, 1996 and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements based on our audit.
We conducted our audit 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 significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Visual Data
Corporation and Subsidiary as of September 30, 1996, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
GOLDSTEIN LEWIN & CO.
Boca Raton, Florida
December 4, 1996
F-3
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
---------------------------------
ASSETS 1997 1996
----------- -----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 2,554,180 $ 158,377
Accounts receivable, net of allowance for
doubtful accounts of $20,898 and $14,056 at 62,695 42,168
September 30, 1997 and 1996, respectively
Prepaid expenses 60,677 32,145
Stockholder receivables -- 50,000
Other receivables 34,337 --
----------- -----------
Total current assets 2,711,889 282,690
----------- -----------
Property, plant and equipment, net 1,861,191 272,393
----------- -----------
Other assets
Financing costs, net of accumulated
amortization of $51,000 at September 30, 1996 -- 102,000
Security deposits and other 14,812 22,068
Deferred offering costs -- 650,000
----------- -----------
Total other assets 14,812 774,068
----------- -----------
Total assets $ 4,587,892 $ 1,329,151
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 215,985 $ 229,043
Deferred revenue 94,295 70,500
Deferred rent -- 1,772
Loans payable - stockholders -- 50,000
Current portion of obligations under capital leases 21,856 50,293
Current portion of mortgage note payable 33,765 --
----------- -----------
Total current liabilities 365,901 401,608
----------- -----------
Convertible notes payable, net of discount -- 680,000
Obligations under capital leases,
net of current portion 8,652 58,142
Mortgage note payable, net of current amount 966,235 --
----------- -----------
974,887 738,142
----------- -----------
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred stock, Par Value $.0001 Per Share;
Authorized 5,000,000 Shares;
Series A Convertible Preferred Stock, Designated 650,000 shares
Issued and Outstanding 185,716 at September 30, 1996 -- 19
Series B Convertible Preferred Stock, Designated 1,000,00 shares
Issued and Outstanding 113,750 at September 30, 1996 -- 11
Common Stock, Par Value $.0001 Per Share;
Authorized 20,000,000 Shares; Issued and Outstanding
3,037,971 and 1,166,275 shares at September 30, 1997 304 117
and 1996, respectively
Additional Paid - in capital 9,401,789 2,770,281
Accumulated deficit (6,154,989) (2,581,027)
----------- -----------
Total stockholders' equity 3,247,104 189,401
----------- -----------
Total liabilities and stockholders' equity $ 4,587,892 $ 1,329,151
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Revenue $ 193,038 $ 111,719
----------- -----------
Operating Costs
Selling, general and administrative 1,441,173 527,692
Compensation and related costs 789,165 985,441
Production 83,357 121,239
Occupancy 82,373 43,875
Professional fees 352,853 298,815
----------- -----------
2,748,921 1,977,062
----------- -----------
Loss from operations (2,555,883) (1,865,343)
----------- -----------
Other Income (Expense)
Interest income 30,403 753
Interest expense (1,042,227) (27,112)
Loss on write - off of property, plant and equipment (6,255) --
----------- -----------
Total other income (expense) (1,018,079) (26,359)
----------- -----------
Net loss $(3,573,962) (1,891,702)
=========== ===========
Weighted Average Shares of Common Stock Outstanding 2,509,249 1,405,228
=========== ===========
Loss Per Share $ (1.42) $ (1.35)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
Series A Series B
Preferred Stock Preferred Stock Common Stock
------------------------- ------------------------ -----------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1995 185,716 $ 19 -- $ -- 873,306 $ 87
Issuance for services and incentives -- -- -- -- 224,219 23
Issuance of shares for cash -- -- 113,750 11 -- --
Issuance of shares for cash -- -- -- -- 15,625 2
Discount on convertible notes -- -- -- -- 53,125 5
Compensation expense on stock
option grants -- -- -- -- -- --
Net loss -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance, September 30, 1996 185,716 19 113,750 11 1,166,275 117
Issuance of shares for
services and incentives -- -- -- -- 22,500 2
Issuance of shares for cash -- -- -- -- 1,000,000 100
Conversion of Preferred Stock (185,716) (19) (113,750) (11) 374,329 37
Conversion of convertible notes -- -- -- -- 212,500 21
Exercise of warrants -- -- -- -- 59,688 6
Exercise of options -- -- -- -- 2,679 1
Issuance of shares for interest expense -- -- -- -- 200,000 20
Issuance of publicly traded warrants -- -- -- -- -- --
Net loss -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance September 30, 1997 -- $ -- -- $ -- 3,037,971 $304
=========== =========== =========== =========== =========== ===========
<CAPTION>
Additional
Paid in Accumulated
Capital Deficit
----------- -----------
<S> <C> <C>
Balance, September 30, 1995 $ 986,815 $ (689,325)
Issuance for services and incentives 724,240 --
Issuance of shares for cash 454,989 --
Issuance of shares for cash 49,998 --
Discount on convertible notes 169,995 --
Compensation expense on stock
option grants 384,244 --
Net loss -- (1,891,702)
----------- -----------
Balance, September 30, 1996 2,770,281 (2,581,027)
Issuance of shares for
services and incentives 114,500 --
Issuance of shares for cash 4,759,571 --
Conversion of Preferred Stock (19) --
Conversion of convertible notes 584,354 --
Exercise of warrants 86,682 --
Exercise of options 3,749 --
Issuance of shares for interest expense 969,521 --
Issuance of publicly traded warrants 113,150 --
Net loss -- (3,573,962)
----------- -----------
Balance September 30, 1997 $ 9,401,789 $(6,154,989)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
1997 1996
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (3,573,962) $ (1,891,702)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 64,378 84,809
Write off of fixed assets 6,255 ---
Provision for doubtful accounts 53,166 ---
Write off of deferred offering costs 650,000 ---
Issuance of shares for:
Interest expense 969,531 ---
Services and incentives 114,500 458,507
Changes in assets and liabilities:
Accounts receivable (73,693) (42,168)
Prepaid expenses (28,532) (23,308)
Other receivables (34,337) ---
Stockholder receivables 50,000 (50,000)
Financing costs 102,000 ---
Accounts payable and accrued expenses (13,058) 171,673
Deferred revenue 23,795 63,500
Deferred rent (1,772) (3,038)
---------------- ----------------
Net cash used in operating activities (1,691,729) (1,231,727)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of land and building (1,542,949) ---
Acquisition of property and equipment (116,288) (82,053)
Increase (decrease) in deposits 7,062 (2,632)
---------------- ----------------
Net cash used in investing activities (1,652,175) (84,685)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage note payable 1,000,000 ---
Payments on capital leases (77,927) (37,889)
Issuance of convertible notes ---- 850,000
Conversion of convertible notes (95,622) ---
Financing costs ---- (153,000)
Issuance of preferred stock ---- 455,000
Issuance of common stock 4,759,671 ---
Proceeds from sale of warrants 113,150 ---
Proceeds from exercise of warrants & options 90,435 61,000
Proceeds from stockholder loans 1,000,000 100,000
Payments on stockholder loans (1,050,000) (50,000)
---------------- ----------------
Net cash provided by financing activities 5,739,707 1,225,111
---------------- ----------------
Net increase (decrease) in cash
and cash equivalents 2,395,803 (91,301)
Cash and cash equivalents, beginning of year 158,377 249,678
---------------- ----------------
Cash and cash equivalents, end of year $ 2,554,180 $ 158,377
================ ================
</TABLE>
F-7
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30,
(continued)
<TABLE>
<CAPTION>
1997 1996
---------------- ----------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash payments for interest $ 72,696 $ 24,635
================ ================
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Issuance of common shares for:
Subscription receivable $ --- $ 50,000
Services and incentives 114,500 1,108,507
---------------- ----------------
$ 114,500 $ 1,158,507
================ ================
Property and equipment financed by capital lease $ 45,813 $ 30,068
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-8
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Visual Data Corporation ("VDC" or the "Company") was incorporated on May 17,
1993, and in September 1996 commenced its principal operations.
The Company is in the business of producing, marketing and distributing video
information libraries intended for use by the general public through various
distribution channels, primarily in the United States. These distribution
channels include the Internet and Interactive television ("ITV"). The
information libraries contain short concise vignettes on various topics such as
travel, medicine, nursing homes and timeshare properties. Through September 30,
1997, the Company has been engaged in the production and sale of video vignettes
to hotels and their distribution via laser disc players installed in travel
agencies throughout the United States.
On August 4, 1997, the Company closed an initial public offering of 1,000,000
shares of its common stock at $6.00 per share and 1,000,000 redeemable warrants
at $.10 per warrant. In addition, the Company granted the underwriters the
option to purchase up to 150,000 additional warrants to cover over-allotments.
During September 1997, the underwriters exercised the over-allotment option and
purchased an additional 150,000 warrants.
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of VDC
and its wholly-owned subsidiaries, HotelView Corporation ("HVC")and CareView
Corporation ("CVC"). All significant intercompany accounts and transactions have
been eliminated in consolidation.
Revenue Recognition
Upon the completion and distribution of the video vignettes to the travel
agents, the non-refundable deposit portion of the contract price is recognized
as revenue. The remaining balance due under the terms of the contracts are
earned and recorded as revenue as rooms are booked by the HVC travel agency
network.
F-9
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Property and equipment under
capital leases is stated at the lower of the present value of the minimum lease
payments at the beginning of the lease term or the fair value at the inception
of the lease. Depreciation is computed using the straight line method over the
estimated useful lives of the related assets. Amortization expense on assets
acquired under capital leases is included with depreciation expense.
Deferred Offering Costs
Prior to September 30, 1996 the Company had incurred $650,000 of costs related
to a proposed public offering of the Company's common stock. Accordingly, such
amounts are reflected as deferred offering costs in the accompanying September
30, 1996 consolidated balance sheet. In accordance with generally accepted
accounting principles, as these costs did not benefit the ultimately consummated
IPO, they were charged to expense during the fiscal year ended September 30,
1997. These costs are included as a component of selling, general and
administrative expense in the accompanying consolidated statement of operations.
Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the 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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
F-10
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
In accordance with Financial Accounting Standards Board Statement on Financial
Accounting Standards ("SFAS") Statement No. 109 deferred tax assets or
liabilities are computed based upon the difference between the financial
statement and income tax basis of assets and liabilities using the enacted
marginal tax rate applicable when the related asset or liability is expected to
be realized or settled. Deferred income tax expense or benefit is based on the
changes in the asset or liability from period to period. If available evidence
suggests that it is more likely than not that some portion or all of the
deferred tax assets will not be realized, a valuation allowance is required to
reduce the deferred tax assets to the amount that is more likely than not to be
realized. Future changes in such valuation allowance would be included in the
provision for deferred income taxes in the period of change.
Earnings Per Share
For the year ended September 30, 1997, net loss per share is based on the
weighted average number of shares of common stock outstanding. Since the effect
of common stock equivalents was anti-dilutive, all such equivalents were
excluded from the calculation of net loss per share.
Pursuant to Securities and Exchange Commission Staff Accounting Bulletins,
common and common equivalent shares issued at prices below the initial public
offering price during the twelve month period prior to a public offering are
required to be included in the calculation of earnings or loss per share as if
they were outstanding for all periods presented prior to the offering (using the
treasury stock method and the public offering price)even if antidilutive.
Accordingly, the weighted average number of shares of common stock outstanding
for the years ended September 30, 1997 and 1996 have been adjusted to reflect
the impact of such additional common and common equivalent shares issued at
prices below the initial public offering price.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses, loans payable, notes payable and obligations under
capital leases approximate fair value due to the short maturity of the
instruments and the provision for what management believes to be adequate
reserves for potential losses.
F-11
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentration of Credit Risk
The Company at times has cash in banks in excess of FDIC insurance limits and
places its temporary cash investments with high credit quality financial
institutions. The Company performs ongoing credit evaluations of its customers'
financial condition and does not require collateral from them. Reserves for
credit losses are maintained at levels considered adequate by management.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year
presentation.
NOTE 2: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including equipment acquired under capital
leases, consists of:
SEPTEMBER 30, LIVES
1997 1996 (YEARS)
---- ---- -------
Building $1,542,948 $ - 39
Furniture and Fixtures 26,029 16,814 7
Equipment 170,525 91,272 5
Editing Equipment 169,305 168,305 3-10
Computer Equipment 55,918 26,608 3-5
Leasehold Improvements - 13,532 7
---------- ---------
1,964,725 316,531
Less: Accumulated Depreciation
and Amortization (103,534) (44,138)
---------- --------
$1,861,191 $ 272,393
========== =========
NOTE 3: STOCKHOLDER RECEIVABLES
Stockholder receivables at September 30, 1996 consisted of $50,000 from one of
the Company's stockholders for the purchase of stock. This amount was received
in cash during the fiscal year ended September 30, 1997.
F-12
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 4: CAPITAL LEASE OBLIGATIONS
The Company acquired certain equipment under leases which are accounted for as
capital leases. The following is a schedule, by year, of the future minimum
lease payments under the capital leases together with the present value of the
net minimum lease payments.
SEPTEMBER 30,
1997 1996
---- ----
Year Ending September 30, 1997 $ - $74,192
1998 27,403 54,418
1999 9,134 -
Thereafter - -
-------- --------
Total Minimum Lease Payments 36,537 128,610
Less:Amount Representing Interest ( 6,029) ( 20,175)
-------- --------
Present Value of Minimum Lease
Payments 30,508 108,435
Current Portion (21,856) (50,293)
-------- --------
Long-Term Portion $ 8,652 $ 58,142
======== ========
Equipment held under capital leases has a book value of $37,174 and $193,748 as
of September 30, 1997 and 1996, respectively. Accumulated depreciation related
to this equipment is $8,639 and $27,582 as of September 30, 1997 and 1996,
respectively.
NOTE 5: CONVERTIBLE NOTES
In July and August 1996, the Company issued units ("1996 Units") consisting of
convertible notes ("1996 Notes") aggregating $850,000 and common stock
aggregating 53,125 shares. Each 1996 Unit consisted of a $50,000 note and 3,125
shares of common stock. The 1996 Notes were unsecured and bore interest at 10%.
Each 1996 Note was convertible into 12,500 additional shares of common stock at
$4.00 per share, subject to the conversion provisions of the 1996 Notes and each
1996 Note matured on January 31, 1997 unless a registration statement was filed.
If such statement had been filed, the maturity date became the earlier of two
weeks after the effective date or July 31, 1997. The convertible 1996 Notes were
recorded at a discount of $170,000, reflecting an average per share price of
$3.20 for all shares issued or to be issued upon conversion.
All convertible notes were converted into common stock in October, 1996.
Accordingly, such notes are classified as long-term debt on the balance sheet as
of September 30, 1996.
F-13
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 6: NOTES PAYABLE - SHAREHOLDERS
Certain stockholders made loans to the Company for working capital purposes.
These loans had an interest rate of one half of 1% per month and were to be
repaid from 50% of the monthly cash received from hotels, with a maturity of six
months from the date of the notes. These shareholders also received 25,000
warrants to purchase common stock at $1.40 for a four year period, expiring
March 4, 2000.
These notes were repaid during the fiscal year ended September 30, 1997.
NOTE 7: NOTES PAYABLE
During the fiscal year ended September 30, 1997, the Company, in exchange for
$1,000,000 in cash, issued units ("1997 Units") consisting of notes payable in
the aggregate amount of $1,000,000 ("1997 Notes") and common stock aggregating
200,000 shares. The 1997 Notes were unsecured, with an interest rate of 10% and
were due the earlier of one month after the effective date of the Company's IPO
or one year from the date of the note. The 1997 Notes were repaid during August
1997. Non - cash interest expense in the amount of $969,531 was recorded during
the fiscal year ended September 30, 1997.
NOTE 8: COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leased their operating facility in Boca Raton, Florida under a
twenty-four month lease which expired in April, 1997. This lease provided for a
monthly base rent of $3,525. In conjunction with the lease, the Company paid
back rent in the amount of $1,494 per month for 24 months ending April, 1997.
From May 1, 1997 through September 5, 1997 the Company leased these facilities
on a month-to-month basis at the same rate. At September 30, 1996, the back
rent payable aggregated $10,118 and is included in accounts payable. No such
back rent is payable at September 30, 1997.
Rent expense for the years ended September 30, 1997 and 1996 aggregated $72,161
and $42,071, respectively.
F-14
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 8: COMMITMENTS AND CONTINGENCIES(continued)
Employment Contracts
Effective October 1996, and as amended during the fiscal year ended September
30, 1997, the Company entered into three year, renewable employment contracts
with the President and Vice President. The contracts provide for annual
compensation of $125,000 each subject to an annual increase of 10%. The
contracts also provide for an annual bonus in cash or stock equal to 3% of the
Company's increase in earnings as defined therein, an annual granting of stock
options for 125,000 shares of common stock to each at $6.00 per share for an
exercise period of five years from the grant date and other fringe benefits. In
the event of the death of the Company's principal officers, the contracts call
for payments of all compensation for a period of one year. In the event of the
disability of the Company's principal officers, the contracts call for payments
of all compensation for a period of no less than six months. The contracts also
include severance agreements which create certain liabilities in the event of
termination without cause aggregating three times the executives annual
compensation plus certain fringes.
Effective August 15, 1997 the Company entered into an employment agreement with
its Chief Operating Officer ("COO"). The term of this agreement is for one year
from the effective date of the agreement and is renewable for successive one
year terms unless terminated. The annual salary under the agreement is $125,000,
which amount will be adjusted annually based upon performance. Also the COO is
eligible to receive a bonus based upon the achievement of agreed upon goals.
Additionally, beginning on September 30, 1998 ("Initial Grant Date") and on each
anniversary of the Initial Grant Date, the COO shall receive 50,000 options to
purchase common stock at an exercise price of $6 per share exercisable for a
period of five years. The contract also provides for the payment of three
months' base salary in the event the COO is terminated without cause.
Effective October 1997, the Company, modified its employment contracts with the
President, Vice President and COO. The contracts now provide for an annual bonus
in cash or stock equal to 2% of the Company's increase in earnings as defined
therein.
F-15
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 8: COMMITMENTS AND CONTINGENCIES(continued)
Underwriter Warrants
- --------------------
In connection with the IPO, the Company granted to the underwriters rights to
purchase from the Company up to 100,000 shares of common stock and 100,000
warrants. 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. Such warrants continue to be
outstanding at September 30, 1997.
NOTE 9: CAPITAL STOCK
Preferred Stock
- ---------------
Series A convertible preferred stock was convertible at the holder's option into
2 shares of common stock. Accordingly, at September 30, 1996, 232,141 shares of
common stock was reserved for this contingency. Each share of the Series A
preferred stock had two votes per share and votes with the common stock. Holders
of Series A preferred stock were entitled to a liquidation distribution of $3.50
per share before any distributions were made on any other capital stock of the
Company. The shares had no dividend rights.
F-16
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
Preferred Stock (continued)
- ---------------------------
Series B convertible preferred stock was convertible at the holder's option into
2 shares of common stock. Accordingly, at September 30, 1996, 142,188 shares of
common stock were reserved for this contingency. Each share of the Series B
preferred stock had two votes per share and votes with the common stock. Holders
of Series B preferred stock were entitled to a liquidation distribution of $4.00
per share after the Series A shareholders had been paid their liquidation
distribution and before any other distributions were made on any other capital
stock of the Company. The shares had no dividend rights.
During the fiscal year ended September 30, 1997 all of the Company's Series A
preferred stock and Series B preferred stock was converted into 374,329 shares
of common stock.
Common Stock
- ------------
Common stock has one vote per share for the election of directors and all other
matters submitted to a vote of stockholders. Shares of common stock do not have
cumulative voting, preemptive, redemption or conversion rights.
The Company, at September 30, 1997 and 1996, had reserved 1,033,645 shares of
common stock for issuance relating to unexpired options and warrants.
Reverse Stock Split
- -------------------
The financial statements have been retroactively adjusted to reflect the effect
of a 1 to 1.6 reverse stock split which occurred in July 1997.
Stock Warrants
- --------------
In conjunction with the issuance of debentures in 1994, the Company issued
warrants redeemable for a total of 11,161 shares of common stock at $1.40 per
share. The warrants are exercisable any time and expire at varying dates between
November 1996 and September 1998.
As part of the Company's private placement offerings for the purchase of common
and preferred shares, the Company issued warrants redeemable for common stock.
The warrants outstanding at September 30, 1997 are for a total of 200,925 shares
of common stock, have an exercise price ranging from $1.40 to $6.60 per share
and expire between December 1997 and July 2002, as follows:
Exercise Number of
Price Shares
------- ---------
$1.40 12,390
2.80 8,334
6.00 90,000
6.60 90,201
------
200,925
=======
Employee Stock Option Plan
In October, 1996, the Board of Directors approved the 1996 Stock Option Plan
(the "Plan") which was approved by a majority of the shareholders at a meeting
on February 9, 1997. The Company has reserved 200,000 shares of common stock for
the grant of qualified incentive options or non-qualified options to employees
and directors of the Company under the Plan. Option prices must provide for an
exercise price of not less than 100% of the fair market value of the common
stock on the date the options are granted unless the eligible employee owns more
than 10% of the Company's common stock for which the exercise price must be at
least 110% of such fair market value. To date, no options have been granted
under the Plan.
F-17
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 11: INCOME TAXES
The deficit accumulated during the development stage (inception through August
31, 1996) of approximately $2,025,000 is capitalized for income tax purposes as
accumulated start-up costs, and is being amortized over a 60 month period
beginning September 1, 1996. The Company has a net operating loss carryforward
as of September 30, 1997 of approximately $3,7000,000 for federal income tax
purposes, inclusive of the amortization of the start-up-costs, which expires
September 30, 2001. The Company has recorded a valuation allowance of
approximately $3,700,000 with respect to any future tax benefits arising from
any net operating losses and the amortization of the start-up costs due to the
uncertainty of their ultimate realization.
NOTE 12: RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128") is effective for fiscal years ending after December 15, 1997. This
statement specifies the computation, presentation and disclosure requirements
for earnings per share for entities with publicly held common stock or potential
common stock. The Company will adopt SFAS 128 in the first quarter of fiscal
1998 and based on current circumstances does not believe the effect of adoption
will be material.
F-18
<PAGE>
VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 13: STRATEGIC ALLIANCE
The Company has entered into a two year agreement (the "Pegasus Agreement") with
Pegasus Systems, Inc. ("Pegasus") whereby Pegasus has agreed to assist in the
marketing and promotion of the HotelView(R) Library to each of its hotel
clients. Pegasus will receive a commission of 20% on sales made for initial
contracts and 10% for renewals of contracts obtained by its efforts. The Pegasus
Agreement also gives Pegasus an option to purchase up to 33 1/3% of the
outstanding capital stock of HVC based upon the number of contracts between
Pegasus member-based hotels and the Company. Specifically, at such time as HVC
has entered into at least 1,000 initial contracts with Pegasus member hotels,
Pegasus has the option to purchase up to 5% of HVC for $500,000 in cash; at such
time as the number of initial contracts increases, Pegasus has the option to
purchase additional ownership percentages of HVC. Assuming all performance
levels were met by Pegasus, for a total of 10,000 contracts, it would have the
option to acquire 33 1/3 % of HVC for a total cash payment of $3,333,333.
<PAGE>
NOTE 14: STOCK OPTIONS
The Company adopted Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation," ("SFAS 123") in the fiscal year ended
1997. As permitted under SFAS 123, the Company has elected to continue using
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," in accounting for employee stock options.
The Company has granted options to purchase 632,720 shares of Common Stock to
consultants, management and directors. Detail of option activity is as follows:
<TABLE>
<CAPTION>
Number Weighted Average Number Weighted Average
of Shares Exercise Price of Shares Exercise Price
- -------------------------------------------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, beginning of 282,720 $ 5.95 8,260 $ 4.24
year
Granted during year 350,000 6.00 274,460 6.00
Terminated during year - - - -
Forfeited during year - - - -
Balance, end of year 632,720 $ 5.98 282,720 $ 5.95
Exercisable at end of 532,720 $ 5.97 282,720 $ 5.95
year
</TABLE>
The following table summarizes the pro forma consolidated results of operations
of the Company as though the fair value based accounting method in SFAS 123 had
been used in accounting for stock options.
<TABLE>
<CAPTION>
Year Ended
- -------------------------------------------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Pro forma results of operations:
Net loss $ 4,515,052 $ 1,891,702
Net loss per share $ 1.80 $ 1.35
</TABLE>
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes model with the following assumptions: expected volatility of
5.0%, risk-free interest rate of 7.0%, expected dividends of $0 and expected
terms of 5 years.
In the fiscal year ended 1996, the Company recorded compensation expense of
$384,244 related to 274,460 share options granted to two executives of the
Company with an exercise price below the estimated market price on the date of
grant.
<PAGE>
NOTE 15: SUBSEQUENT EVENT
In November, 1997 the Company completed the acquisition of certain assets of
Armigeron Information Services, Inc. ("Armigeron"), including web servers with
supporting network infrastructure and context sensitive web technology which
allows for highly complex, interactive web site development. The Company also
acquired Armigeron's Internet service business which currently includes thirty
one clients for whom Armigeron acted as a web site host, generating annual
revenues of approximately $100,000. In conjunction with the asset purchase, the
Company and the principals of Armigeron entered into a software development
agreement for the development of software that will allow the Company's full
motion video libraries to be accessed and viewed via the Internet.
F-19
<PAGE>
Item 8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
On October 1, 1997 Goldstein Lewin & Co. was dismissed as the Company's
independent auditor. Goldstein Lewin & Co. had served as the Company's
independent auditor since 1994. During the period Goldstein Lewin & Co. was
engaged as the Company's independent auditor there were no disagreements with
Goldstein Lewin & Co. on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure. No accountants'
report on the financial statements of the Company issued by Goldstein Lewin &
Co. contained an adverse opinion or a disclaimer of opinion, or was qualified or
modified as to uncertainty, audit scope or accounting principles. The Company
requested that Goldstein Lewin & Co. furnish it with a letter addressed to the
Securities and Exchange Commission stating whether or not it agreed with the
statements made by the Company in response to Item 4 of the Report on Form 8-K
filed by the Company with the Securities and Exchange Commission on October 1,
1997 and, if not, stating the respects in which he did not agree. The Company
filed a copy of such letter from Goldstein Lewin & Co. confirming its agreement
to the Company's statements as an exhibit to the Form 8-K Report filed with the
Securities and Exchange Commission on October 1, 1997. See Item 13(a), Exhibit
16 hereto.
On October 1, 1997 the Company engaged Arthur Andersen, LLP as its independent
accountant for the fiscal year ended September 30, 1997. The decision to change
accountants was approved by the Company's Board of Directors.
11
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The following table sets forth the names, ages and positions held with respect
to each Director and Executive Officer of the Company.
Name Age Position
---- --- --------
Randy S. Selman 41 President, Chief Executive Officer, acting
Chief Financial Officer, Director
Alan M. Saperstein 38 Senior Vice President, Secretary, Director
David E. Goodman 39 Executive Vice President; Chief Operating
Officer
Ben Swirsky 55 Director
Brian K. Service 50 Director
Eric Jacobs 50 Director
Randy S. Selman. Since the Company's inception in May 1993, Mr. Selman has
served as the Company's Chief Executive Officer, President, and a director and
since September 1996, its acting Chief Financial Officer. From March 1985
through May 1993, Mr. Selman was Chairman of the Board, President and Chief
Executive Officer of SK Technologies Corporation (SKTC-Nasdaq SmallCap Market),
a publicly-traded software development company. SKTC develops and markets
software for point-of-sale with complete back office functions such as
inventory, sales analysis and communications. Mr. Selman founded SKTC in 1985
and was involved in the company's initial public offering in 1989. Mr. Selman's
responsibilities included management of SKTC, public and investor relations,
finance, high level sales and general overall administration.
Alan M. Saperstein. Mr. Saperstein has served as the Company's Vice President,
Secretary and a director since its inception in May 1993. From March 1989 until
May 1993, Mr. Saperstein was a free-lance producer of video film projects. Mr.
Saperstein has provided consulting services for corporations which have set up
their own sales and training video departments. From 1983 through 1989, Mr.
Saperstein was the Executive Director/Entertainment Division of NFL Films where
he was responsible for supervision of all projects, budgets, screenings and
staffing.
12
<PAGE>
David E. Goodman. Mr. Goodman has been Executive Vice President and Chief
Operating Officer of the Company since August 1997. From January 1997 until
joining the Company, Mr. Goodman was founder, President and Chief Executive
Officer of Edenark Group, Inc., an advisory services and development management
firm specializing in start-ups, reorganizations, mergers and acquisitions with a
geographic focus on the southeast United States, Mexico, Central America and the
Caribbean Basin. From March 1988 until December 1996 Mr. Goodman was with
LaSalle Partners and as a partner in the firm he held various senior line
positions including Managing Director of the firm's McCoy Group joint venture
and Equity Vice President/Group Manager of Florida and Latin America for the
firm's Management Services Group. From 1985 until 1988, Mr. Goodman was Manager
of New Product Development for the Beecham Cosmetics subsidiary of Beecham plc.
where he managed the marketing and advertising strategies for consumer products
in 36 countries. From 1981 until 1985 Mr. Goodman was an Account Executive with
the Leo Burnett and J. Walter Thompson advertising agencies and developed
advertising and marketing strategies for clients such as Green Giant, Keebler,
Kimberly-Clark, Kraft and Pillsbury. Mr. Goodman received a MBA from the Indiana
University School of Business and a B.S. with honors from Indiana State
University.
Ben Swirsky. Mr. Swirsky has been a member of the Board of Directors since July
1997 and serves on the Audit Committee of the Board of Directors. Since June
1992, Mr. Swirsky has been the President and Chief Executive Officer of Slater
Steel, Inc., a publicly traded company listed on the Toronto Stock Exchange
(SSI) with investments in the steel, steel service, forging, pole-line hardware
and trucking industries. Mr. Swirsky is also a member of the Board of Directors
of the Four Seasons Hotel Corp., a chain of first class hotels located
throughout the world.
Brian K. Service. Mr. Service has been a member of the Board of Directors of the
Company since July 1997 and serves on the Audit Committee of the Board of
Directors. Mr. Service is currently an international business consultant with
clients in North and South America, the United Kingdom, Asia, Australia and New
Zealand. From October 1992 to October 1994 Mr. Service was CEO and Managing
Director of Salmond Smith Biolad, a New Zealand publicly-traded company. From
October 1986 to October 1992 he was CEO and Executive Chairman of Milk Products
Holding (North America) Inc., a wholly-owned subsidiary of the New Zealand Dairy
Board in Santa Rosa California, which was the sole marketer of New Zealand dairy
products in North America.
Eric Jacobs. Mr. Jacobs has been a member of the Board of Directors since July
1997. From March 1996 until August 1997, Mr. Jacobs was Vice President and
General Manager of the Company's wholly owned subsidiary, HotelView(R)
Corporation and thereafter he has served as Vice President and General Manager
of the Company's wholly owned subsidiary, CondoView Corporation. Since 1976, Mr.
Jacobs has served as the Chairman of the Miami Beach Visitor and Convention
Authority and since September 1993 as Chairman of the Greater Miami and the
Beaches Hotel Association. Since 1972 Mr. Jacobs has been a member of Miami
Beach Chamber of Commerce and has served as its Chairman since September 1996.
From 1972 through October 1993, Mr. Jacobs was the owner, President, and General
Manager of the Tarleton Hotel, Miami Beach, Florida.
13
<PAGE>
There is no family relationship between any of the executive officers and
directors. Each director is elected at the Company's annual meeting of
shareholders and holds office until the next annual meeting of shareholders, or
until his successor is elected and qualified. At present, the Company's bylaws
provide for not less than two directors. The bylaws permit the Board of
Directors to fill any vacancy and such director may serve until the next annual
meeting of shareholders or until his successor is elected and qualified.
Officers are elected annually by the Board of Directors and their terms of
office are at the discretion of the Board. The officers of the Company devote
full time to the business of the Company.
Key Employees
While not executive officers of the Company, the following individuals are
expected to make a significant contribution to the business of the Company.
David B. Chestler. Mr. Chestler, 34, has been General Manager of the Company's
HotelView Corporation subsidiary since November 1997. From 1989 until joining
the Company, Mr. Chestler was employed at Utell International, the world's
largest hotel reservation, sales and marketing company, serving as Regional
Director for the Eastern Region and as Vice President of Sales & Development,
North America, where he was responsible for $400 million in revenue from a
portfolio of 6,500 hotels, including 400 in the Caribbean, comprised of chains
and independents.
Jeff Hill. Mr. Hill, 46, has been General Manager of the Company's CareView
Corporation subsidiary since December 1997. From July 1996 until joining the
Company, Mr. Hill performed certain private consulting in the health industry.
Prior thereto, Mr. Hill held various executive management positions with
Emergency Consultants, a physician practice management group (January 1994 until
June 1996); SurgiCare America, an operator of ambulatory surgery centers
(September 1991 to January 1993); and CarePlus, a provider of home health
services (September 1984 to September 1991). Mr. Hill received a B.B.A. in
Marketing from Florida International University.
Directors' Compensation
Directors who are not employees of the Company receive $1,000 per meeting as
compensation for serving on the Board of Directors, as well as reimbursement of
reasonable out-of-pocket expenses incurred in connection with their attendance
at Board of Directors' meetings. Pursuant to the Company's 1996 Stock Option
Plan (the "Plan"), directors who are not 10% shareholders or employees may
receive a grant of Common Stock and non-qualified stock options as described
under the Plan. In the alternative, at the option of the Company and subject to
the terms of the Underwriting Agreement, the Company may grant outside directors
fair market value options outside of the Plan.
On July 30, 1997, the Company granted to each of Messrs. Service and Swirsky
options outside of
14
<PAGE>
the Plan to each acquire 50,000 shares of the Company's Common Stock at an
exercise price of $6.00 per share, being the fair market value on the date of
grant. The term of these options is five years from the date of grant, with
25,000 options vesting on the first anniversary of the date of grant, 12,500
vesting on the second anniversary of the date of grant and the remaining 12,500
vesting on the third anniversary of the date of grant. Once vested, the options
remain exercisable until the expiration date thereof. In the event, however,
either Mr. Service or Mr. Swirsky are not members of the Company's Board of
Directors at the time the options vest, they will no longer be entitled to
receive such options.
Compliance With Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Company under Rule 16a-3(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") during the fiscal year ended September 30, 1997 and
Forms 5 and amendments thereto furnished to the Company with respect to the
fiscal year ended September 30, 1997, as well as any written representation from
a reporting person that no Form 5 is required, the Company is not aware of any
person that failed to file on a timely basis, as disclosed in the aforementioned
Forms, reports required by Section 16(a) of the Exchange Act during the fiscal
year ended September 30, 1997, other than Mr. David Goodman, the Company's
Executive Vice President and Chief Operating Officer. Mr. Goodman joined the
Company in August 1997 and through an administrative error he was tardy in
filing his initial Form 3, which such form has been filed as of the date hereof.
Item 10. Executive Compensation
Cash Compensation
The following table summarizes all compensation accrued by the Company in each
of the last three fiscal years for the Company's Chief Executive Officer and
each other executive officers serving as such whose annual compensation exceeded
$100,000. Directors of the Company do not receive compensation for serving in
such capacity, other than non-employee directors who receive $1,000 for each
meeting attended.
<TABLE>
<CAPTION>
Long - Term
Annual Compensation Compensation Awards
------------------- -------------------
Name and Other Annual Restricted Options All Other
Principal Position Year Salary Bonus Compensation Stk Awds SARs(#) LTIP Compen.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Randy S. Selman,
President, Chief 1997 $123,350 -0- $2,100.00(1) -0- -0- -0- -0-
Executive Officer, 1996 $ 83,000 -0- $2,092.84(2) -0- 137,230 -0- -0-
acting Chief 1995 $ 43,333 -0- $2,174.83(3) -0- -0- -0- -0-
Financial Officer, Director
Alan Saperstein,
</TABLE>
15
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Senior Vice President, 1997 $123,350 -0- $5,430.00(4) -0- -0- -0- -0-
Secretary and 1996 $83,000 -0- $5,927.19(5) -0- 137,230 -0- -0-
Director 1995 $43,333 -0- $5,951.73(6) -0- -0- -0- -0-
David E. Goodman,(7)
Executive Vice 1997 $19,130 -0- $ -0- -0- -0- -0- -0-
President and 1996 $ -0- -0- $ -0- -0- -0- -0- -0-
Chief Operating 1995 $ -0- -0- $ -0- -0- -0- -0- -0-
</TABLE>
- -----------------------------
<TABLE>
<S> <C>
(1) Includes $672.00 for disability insurance and $1,428.00 for medical insurance.
(2) Includes $568.70 for disability insurance and $1,524.14 for medical insurance.
(3) Includes $616.00 for disability insurance and $1,558.83 for medical insurance.
(4) Includes $424.00 for disability insurance and $5,006.00 for medical insurance.
(5) Includes $424.08 for disability insurance and $5,503.11 for medical insurance.
(6) Includes $388.74 for disability insurance and $5,562.99 for medical insurance.
(7) Mr. Goodman joined the Company in August , 1997.
</TABLE>
Employment Agreements
In October 1996 the Company entered into employment agreements (the
"Agreements") with Randy S. Selman, the Company's Chief Executive Officer,
President, acting Chief Financial Officer, and a director, and with Alan
Saperstein, the Company's Vice President, Secretary, and a director. The
Agreements between the Company and each of Messrs. Selman and Saperstein, as
amended on April 30, 1997, is substantially similar. The term of the Agreements
is for three years from the effective date of the Agreements and is renewable
for successive one year terms unless terminated. The annual salary under each of
the Agreements is $125,000, which amount will be increased by 10% each year.
Messrs. Selman and Saperstein are also each eligible to receive an annual bonus
in cash or stock equal to 2% of the Company's earnings before income tax,
depreciation and amortization (EBITDA) on that portion of EBITDA that has
increased over the previous year's EBITDA. Additionally, on January 1 of each
year Messrs. Selman and Saperstein shall receive options (which contain certain
anti-dilution provisions) to purchase 125,000 shares of Common Stock at $6.00
per share for an exercise period of five years from the Grant Date.
The Agreements also provide, among other things, for participation in any
profit-sharing or retirement plan and in other employee benefits applicable to
employees and executives of the Company. The Agreements further provide for an
automobile allowance and fringe benefits commensurate with the duties and
responsibilities of Messrs. Selman and Saperstein. The Agreements also provide
for benefits in the event of disability and contain certain non-disclosure and
non-competition provisions. Additionally, Messrs. Selman and Saperstein may be
granted certain bonus incentives by the Company's Board of Directors.
Furthermore, the Company has agreed to indemnify each of them for any
obligations or guaranties which either of them may have undertaken on behalf of
the Company.
16
<PAGE>
Under the terms of the Agreements, the Company may terminate the employment of
Mr. Selman or Mr. Saperstein either with or without cause. If the Agreement is
terminated by the Company without good cause, or by Mr. Selman or Mr.
Saperstein, as applicable, the Company would be obligated to pay that executive
an amount equal to three times that executive's current annual compensation
(including base salary and bonus), payable in bi-weekly installments (except in
the case of a termination upon a change in control wherein the executive may
elect either a lump sum payment, discounted to present market value or payment
over a three year period in bi-weekly installments). Additionally, the executive
would be entitled to participate in and accrue medical benefits for a period of
two years after the date of termination without cause (by the Company) or for
good cause (by the executive). To the extent that either Messrs. Selman or
Saperstein are terminated for cause, no severance benefits shall be paid.
In August 1997 the Company entered into an employment agreement with David E.
Goodman, the Company's Executive Vice President and Chief Operating Officer. The
terms of this one year agreement are substantially similar to the Agreements
between the Company and each of Messrs. Selman and Saperstein. Mr. Goodman is
currently paid a base salary of $137,500, which such amount will be increased by
10% each year. Mr. Goodman is also eligible to receive an annual bonus in cash
or stock equal to 2% of EBITDA that has increased over the previous years
EBITDA. Mr. Goodman was also granted options to acquire up to 250,000 shares of
the Company's Common Stock at an exercise price of $6.00, which such options
vest as follows: 50,000 shares vested on September 30, 1997; an additional
50,000 shares vested on January 1, 1998, and thereafter an additional 50,000
shares will vest on each of September 30, 1998, September 30, 1999 and September
30, 2000. Should the Company meet certain undisclosed financial targets, the
vesting date of the September 30, 1999 and 2000 options shall be accelerated to
September 30, 1998. The employment agreement between the Company and Mr. Goodman
provides for participation in any profit-sharing or retirement plan and in other
employee benefits applicable to employees and executive officers of the Company,
including automobile allowances and fringe benefits commensurate with the duties
and responsibilities of Mr. Goodman. Under the terms of the agreement, either
party may terminate the agreement without cause upon 30 days prior written
notice, wherein Mr. Goodman would be entitled to receive three months' salary as
severance. Finally, the agreement, which provides for termination with cause, or
upon Mr. Goodman's death or disability, also contains a two year non-compete and
certain non-disclosure provisions.
Incentive and Nonqualifed Stock Option Plan
On February 9, 1997 the Board of Directors and a majority of the Company's
shareholders adopted the Company's 1996 Stock Option Plan. The purpose of the
Plan is to increase the employees', advisors, consultants' and non-employee
directors' proprietary interest in the Company and to align more closely their
interests with the interests of the Company's shareholders. The purpose of the
Plan is also to enable the Company to attract and retain the services of
experienced and highly qualified employees and non-employee directors.
17
<PAGE>
The Company has reserved an aggregate of 200,000 shares of Common Stock for
issuance pursuant to options granted under the Plan ("Plan Options"). As of the
date hereof, no options have been granted under the Plan. The Board of Directors
or a Committee of the Board of Directors (the "Committee") will administer the
Plan including, without limitation, the selection of the persons who will be
granted Plan Options under the Plan, the type of Plan Options to be granted, the
number of shares subject to each Plan Option and the Plan Option price.
Plan Options granted under the Plan may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or options that do not so qualify
("Non-Qualified Options"). In addition, the Plan also allows for the inclusion
of a reload option provision ("Reload Option"), which permits an eligible person
to pay the exercise price of the Plan Option with shares of Common Stock owned
by the eligible person and receive a new Plan Option to purchase shares of
Common Stock equal in number to the tendered shares. Any Incentive Option
granted under the Plan must provide for an exercise price of not less than 100%
of the fair market value of the underlying shares on the date of such grant, but
the exercise price of any Incentive Option granted to an eligible employee
owning more than 10% of the Company's Common Stock must be at least 110% of such
fair market value as determined on the date of the grant.
The term of each Plan Option and the manner in which it may be exercised is
determined by the Board of the Directors or the Committee, provided that no Plan
Option may be exercisable more than 10 years after the date of its grant and, in
the case of an Incentive Option granted to an eligible employee owning more than
10% of the Company's Common Stock, no more than five years after the date of the
grant. In any case, the exercise price of any stock option granted under the
Plan will not be less than 85% of the fair market value of the Common Stock on
the date of grant. The exercise price of Non-Qualified Options shall be
determined by the Board of Directors or the Committee.
The per share purchase price of shares subject to Plan Options granted under the
Plan may be adjusted in the event of certain changes in the Company's
capitalization, but any such adjustment shall not change the total purchase
price payable upon the exercise in full of Plan Options granted under the Plan.
Officers, directors and key employees of and consultants to the Company and its
subsidiaries will be eligible to receive Non-Qualified Options under the Plan.
Only officers, directors and employees of the Company who are employed by the
Company or by any subsidiary thereof are eligible to receive Incentive Options.
All Plan Options are nonassignable and nontransferable, except by will or by the
laws of descent and distribution, and during the lifetime of the optionee, may
be exercised only by such optionee. If an optionee's employment is terminated
for any reason, other than his death or disability or termination for cause, or
if an optionee is not an employee of the Company but is a member of the
Company's Board of Directors and his service as a Director is terminated for any
reason, other than death or disability, the Plan Option granted to him shall
lapse to the extent unexercised on the earlier of the expiration date or 30 days
following the date of termination. If the optionee dies during the term
18
<PAGE>
of the expiration date of the Plan Option or the date one year following the
date of the optionee's death. If the optionee is permanently and totally
disabled within the meaning of Section 22(c)(3) of the Code, the Plan Option
granted to him lapses to the extent unexercised on the earlier of the expiration
date of the option or one year following the date of such disability.
The Board of Directors or the Committee may amend, suspend or terminate the Plan
at any time, except that no amendment shall be made which (i) increases the
total number of shares subject to the Plan or changes the minimum purchase price
therefor (except in either case in the event of adjustments due to changes in
the Company's capitalization), (ii) affects outstanding Plan Options or any
exercise right thereunder, (iii) extends the term of any Plan Option beyond ten
years, or (iv) extends the termination date of the Plan.
Unless the Plan shall theretofore have been suspended or terminated by the Board
of Directors, the Plan shall terminate on approximately 10 years from the date
of the Plan's adoption. Any such termination of the Plan shall not affect the
validity of any Plan Options previously granted thereunder.
Item 11. Security Ownership of Certain Beneficial Owners and Management
As of December 31, 1997 there are 3,082,150 shares of Common Stock issued and
outstanding. The following table sets forth, as of the close of business on
January 1, 1998, (a) the name, address and number of shares of each person known
by the Company to be the beneficial owner of more than 5% of any class of each
the Company's voting securities and (b) the number of shares of each class of
voting securities owned by each director and all officers and directors as a
group, together with their respective percentage holdings of such shares. Unless
otherwise indicated, the address for each person is 1291 SW 29 Avenue, Pompano
Beach, FL 33069.
Name and Amount of Percentage
Address of Beneficial of
of Beneficial Owner Ownership of Stock Class (4)
- ------------------- ------------------ ---------
Randy S. Selman(1) 368,640 11.0%
Alan M. Saperstein(2) 388,512 11.6%
David E. Goodman(3) 100,000 3.1%
Ben Swirsky(4) 0 -
Brian K. Service(5) 0 -
Eric Jacobs 4390 (6)
All Officers and Directors
as a Group (six persons)
(1)(2)(3)(4)(5) 861,542 23.2%
- --------------------------
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(1) Includes options to acquire an aggregate of 140,021 shares of Common Stock
and options to acquire an aggregate of 125,000 shares of Common Stock at an
exercise price of $6.00 per share. See Item. 10. Executive Compensation -
Employment Agreements and Item 12. Certain Relationships and Related
Transactions.
(2) Includes options to acquire an aggregate of 138,570 shares of Common Stock
per share and options to acquire an aggregate of 125,000 shares of Common
Stock at an exercise price of $6.00 per share. See Item. 10. Executive
Compensation - Employment Agreements and Item 12. Certain Relationships and
Related Transactions.
(3) Includes options to acquire an aggregate of 100,000 shares of Common Stock
at an exercise price of $6.00 per share but excludes an additional 150,000
options, exercisable at $6.00 per share, which have not yet vested. See
Item 10. Executive Compensation - Employment Agreements.
(4) Excludes options to acquire an aggregate of 50,000 shares of Common Stock
at an exercise price of $6.00 per share granted in August 1997 immediately
following the Company's initial public offering. See Item 9. Directors,
Executive Officers, Promoters and Control Persons; Compliance with Section
16(a) of the Exchange Act - Directors Compensation.
(5) Excludes options to acquire an aggregate of 50,000 shares of Common Stock
at an exercise price of $6.00 per share granted in August 1997 immediately
following the Company's initial public offering. See Item 9. Directors,
Executive Officers, Promoters and Control Persons; Compliance with Section
16(a) of the Exchange Act - Directors Compensation.
(6) Represents less than 1%.
Item 12. Certain Relationships and Related Transactions
In February 1996 the Company granted each of Messrs. Selman and Saperstein,
executive officers and directors of the Company, options to acquire 137,230
shares of the Company's common stock at an exercise price of $.00016 per share
as a bonus.
The Company has adopted a corporate governance policy which requires the
approval of any transaction between the Company and any officer, director or 5%
shareholder by a majority of the independent, disinterested directors. In
addition, pursuant to the inclusion of its securities on The Nasdaq(TM) SmallCap
Market, the Company is subject to compliance with certain corporate governance
standards adopted by The Nasdaq(TM) Stock Market, Inc.
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PART IV
Item 13. Exhibits and Reports on Form 8-K
The following documents are filed as a part of this report or are incorporated
by reference to previous filings, if so indicated:
(a) Exhibits
Exhibit No. Description
- ----------- -----------
3(ii) Bylaws of Visual Data Corporation are incorporated
herein by reference to Exhibit 3(iii) to the Registration
Statement on Form SB- 2, File No. 333-18819, as amended, as
declared effective by the Securities and Exchange Commission
on July 30, 1997
10(i) Employment Agreement by and between Visual Data Corporation
and David E. Goodman, as amended
10(ii) Contract For Purchase and Sale of Real Property, as amended.
16 Letter on change of certifying accountant is hereby
incorporated by reference to Exhibit 1 to the Report on Form
8-K as filed with the Securities and Exchange Commission by
Visual Data Corporation on October 1, 1997.
21 Subsidiaries of the registrant
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Visual Data Corporation has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Visual Data Corporation
By: /s/ Randy S. Selman
-------------------------------------
Randy S. Selman, President, Chief
Executive Officer, Acting Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Randy S. Selman Director, President, January 15, 1998
- ---------------------------- Chief Executive Officer,
Randy S. Selman Acting Chief Financial
Officer
/s/ Alan M. Saperstein Director, Senior Vice January 15, 1998
- ---------------------------- President and Secretary
Alan M. Saperstein
/s/ David E. Goodman Executive Vice President January 15, 1998
- ---------------------------- and Chief Operating Officer
David E. Goodman
/s/ Ben Swirsky Director January 15, 1998
- ----------------------------
/s/ Brian K. Service Director January 15, 1998
- ----------------------------
Brian K. Service
/s/ Eric Jacobs Director January 15, 1998
- ----------------------------
Eric Jacobs
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EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
3(ii) Bylaws of Visual Data Corporation are incorporated herein by
reference to Exhibit 3(iii) to the Registration Statement on
Form SB-2, File No. 333- 18819, as amended, as declared
effective by the Securities and Exchange Commission on July
30, 1997
10(i) Employment Agreement by and between Visual Data Corporation
and David E. Goodman, as amended
10(ii) Contract For Purchase and Sale of Real Property, as amended.
16 Letter on change of certifying accountant is hereby
incorporated by reference to Exhibit 1 to the Report on Form
8-K as filed with the Securities and Exchange Commission by
Visual Data Corporation on October 1, 1997.
21 Subsidiaries of the registrant
27 Financial Data Schedule
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EXHIBIT 10(i)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the 15th day of August, 1997 (the "Effective Date"), between Visual Data
Corporation, a Florida corporation and each of its parent company, subsidiaries,
or affiliated companies (collectively the "Company") and David E. Goodman, an
individual whose address is 1600 S.W. 5th Avenue, Pompano Beach, Florida 33060
(the "Employee").
RECITALS
A. The Company is a Florida corporation and is principally engaged in
the business of acquiring, marketing, developing, distributing, and product
production of video information, including without limitation hotel, resort and
attraction specific, travel related information (the "Business/Business
Activities").
B. The Company intends to employ the Employee as the Company's Chief
Operating Officer and the Employee desires to be employed as the Company's Chief
Operating Officer, pursuant to the terms and conditions set forth herein.
C. The Company has established a valuable reputation and goodwill in
the Business.
D. The Employee by virtue of the Employee's employment with the Company
will become familiar with and possessed with the manner, methods, trade secrets
and other confidential information pertaining to the Company's business,
including the Company's client base.
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Company and the Employee do hereby agree as follows:
1. Recitals. The above recitals are true, correct, and are herein
incorporated by
reference.
2. Employment. The Company hereby employs the Employee as the Company's
Chief Operating Officer, on a full-time basis, and the Employee hereby accepts
employment as the Company's Chief Operating Officer, upon the terms and
conditions hereinafter set forth.
3. Duties, Authority and Power During Employment Period. The Company
agrees to employ the Employee in the capacity of Chief Operating Officer of the
Company and the Employee shall diligently devote the Employee's full time and
efforts during the Company's normal business hours to the business and affairs
of the Company. The duties of the Employee shall be subject to the direction of
the Company's Chief Executive Officer and the Employee shall perform all duties
as may be required by the Company including without limitation the following:
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a. The Employee shall be employed as Chief Operating Officer
of the Company and shall render and perform all duties commonly discharged by
persons holding the position of a Chief Operating Officer in a like business.
The Employee shall also perform other duties of a similar nature as the Company
shall from time to time require and as designated by the Company's Chief
Executive Officer. In such capacity, the Employee shall have the duties and
responsibilities normally associated with such a position. The Employee shall
abide by all Company policies.
b. During the term of this Agreement, the Employee shall
notify the Company within twenty-four (24) hours of any solicitation of Employee
for employment, including any oral or written contract, offer of inquiry in
which a position of employment, consulting arrangement or affiliation is
discussed with a competitive organization in the Business. During the term of
this Agreement, the Employee will neither enter into nor engage in negotiations
for any oral or written employment, consulting or affiliation agreement or
arrangement with any third part(ies) in the Business in any capacity without the
express prior written consent of the Company.
Notwithstanding the foregoing, Company acknowledges that Employee is a
participant, investor and/or owner in other businesses and for-profit ventures
("Other Ventures"). Employee's continual involvement in these Other Ventures
during Employee's employment with the Company shall not be deemed a violation or
default of this Agreement.
4. Compensation and Benefits. Subject to the provisions of Section 5,
as the sole compensation for all services rendered by the Employee on behalf of
the Company, the Company shall pay the Employee the following compensation:
a. Base Salary. The Employee shall initially receive an annual
base salary of One Hundred Twenty-Five Thousand ($125,000.00) Dollars, payable
on or about the 15th and the 30th day of each month, adjusted annually, based on
performance. Both parties acknowledge that the Company shall withhold any and
all appropriate taxes required by Federal, state, or local laws or regulations
including, without limitation, federal income tax or FICA, social security, and
Medicare.
b. Bonus Compensation. The Employee shall receive an annual
bonus compensation based upon performance goals determined by the Company's
Chief Executive Officer in discussions with the Employee. The Bonus Compensation
shall be established within thirty (30) days of the Effective Date of this
Agreement for the first year of employment and within thirty (30) days of the
anniversary of the Effective Date for each year of employment thereafter.
c. Stock Options.
(1) Employee shall receive options ("Options") to
purchase up to 250,000 shares of common stock of the Company (the "Common
Stock") at an exercise price of Six Dollars ($6.00) (the "Exercise Price") per
share, which options shall be exercisable, subject
2
<PAGE>
to the provisions of Section 4c(2) below, for a period of five (5) years from
the date of vesting (the "Exercise Period"), which options shall vest as
follows: Commencing on September 30, 1998 (the "Initial Grant Date"), and
continuing on each anniversary of the Initial Grant Date for a period of four
years thereafter (for a total of five (5) years through September 30, 2002),
Options to purchase up to 50,000 shares of Common Stock at the Exercise Price
for the Exercise Period (for a total of 250,000 shares); provided that the
Company's financial targets are achieved, as determined by the Company, the
Employee's Options for years 4 and 5 shall vest on September 30, 2000.
(2) Section 4c(1) above notwithstanding, in the event
that the Employee's employment with the Company is terminated
A. as a result of the Employee's
"disability," as hereinafter defined, or death, the Exercise Period for any
Options that have vested shall be for a period of thirty (30) days after such
disability or death;
B. by the Company for "cause", as hereafter
defined, or without cause by the Employee, the Exercise Period for any Options
that have vested shall terminate upon the date of (i) termination for "cause" or
(ii) the Employee's resignation; and
C. by the Company for any reason other than
for "cause", then the Exercise Period for any Options that have vested shall be
for a period of twelve (12) months from the date of the Employee's termination
of employment.
(3) The provisions of this Section 4c
notwithstanding, to the extent that the Employee is in breach of any of the
provisions of Sections 6 or 7, the Exercise Period for any vested Options shall
terminate upon the date of such breach.
d. Automobile Allowance. The Employee shall receive an
automobile allowance of $500.00 per month.
e. Employee Benefits. The Employee shall be entitled to
participate in all benefit programs of the Company currently existing or
hereafter made available generally to other salaried employees in a similar
management capacity including, without limitation, fully paid group medical and
dental insurance for the Employee and his dependents and holiday pay consistent
with other employees of the Company.
f. Vacation. Employee shall receive there (3) weeks paid
vacation each year. Notwithstanding the foregoing, before Employee shall
schedule vacation in excess of three (3) consecutive days, Employee must receive
prior approval from the Chief Executive Officer of the Company, which approval
shall not be unreasonably withheld.
g. Reimbursable Expenses. The Employee shall be reimbursed for
all pre-approved, documented expenses.
3
<PAGE>
5. Term and Termination.
a. Term. Subject to the provisions for termination as
hereinafter provided, the term (the "Term") of employment hereunder shall
commence on the Effective Date and continue for a period of one (1) year
thereafter. This term of employment shall be automatically renewed except as
otherwise set forth in this Section 5. For purposes of this Agreement, the Term
shall include the initial term and any renewals thereof.
b. Termination Without Cause. The Employee's employment with
the Company may be terminated by either party upon thirty (30) days prior
written notice of the terminating party's intent to terminate the Employee's
employment with the Company. In the event Employee is terminated by the Company
without cause, Employee shall receive three (3) months base salary, at
Employee's base salary as of the date of such termination, as severance, to be
paid by the Company on or before the effective date of termination.
c. Termination Upon Employee's Disability or Death.
(1) The Employee's employment with the Company may be
terminated by either party upon the "disability" of the employee. For purposes
of this Agreement, "disability" shall be deemed to have occurred in the event
(A) the Employee is unable by reason of sickness or accident, to perform the
Employee's duties under this Agreement for an aggregate of 180 days in any
twelve-month period or (B) the Employee has a guardian of the person or estate
appointed by a court of competent jurisdiction. Termination due to disability
shall be deemed to have occurred upon the first day of the month following the
determination of disability as defined in the preceding sentence.
(2) `The Employee's employment shall be terminated
immediately upon the Employee's death.
d. Termination by the Company for Cause.
(1) Nothing herein shall prevent the Company from
terminating Employment immediately for "Cause," as hereinafter defined. Any
rights and benefits the Employee may have in respect of any compensation shall
be determined in accordance with the terms of such other compensation
arrangements or such plans or programs.
(2) Cause" shall mean and include those actions or
events specified below in subsections (a) through (l) to the extent the same
occur, or the events constituting the same take place, subsequent to the date of
execution of this Agreement:
(a) Falsification of work records;
(b) Unauthorized taking of company
merchandise or property;
4
<PAGE>
(c) Willful or intentional disobedience,
insubordination, or refusal to perform the assigned duty of his occupation;
(d) Embezzlement;
(e) Dishonesty;
(f) Fraud;
(g) Conviction of a felony or other charges
involving moral turpitude involving company affairs;
(h) Intentional injury to any of his fellow
employees in connection with company business;
(i) Conspiracy against Visual Data;
(j) Disclosure of any confidential
information of Visual Data;
(k) Willful or intentional doing of any
other acts materially inimical to the interest of employer;
(l) Breach of Employer's obligation under
this Agreement.
(3) Notwithstanding anything else contained in this
Agreement, this Agreement will not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Employee a notice of
termination stating that the Employee committed one of the types of conduct set
forth in Section 5(d)(2) of this Agreement and specifying the particulars
thereof.
6. Covenant Not to Compete and Non-Disclosure of Information.
a. Covenant Not to Compete. The Employee acknowledges and
recognizes the highly competitive nature of the Company's business and the
goodwill, continued patronage, and specifically the names and addresses of the
Company's Clients (as hereinafter defined) constitute a substantial asset of the
Company having been acquired through considerable time, money and effort.
Accordingly, in consideration of the execution of this Agreement, the Employee
agrees to the following:
(1) That during the Term of the Employee's employment
with the Company and for a period of two years after termination of this
Agreement, for whatever reason (the "Restricted Period") and within the United
States (the "Restricted Area"), the Employee will not, individually or in
conjunction with others, directly or indirectly, engage in any Business
Activities, whether as an officer, director, proprietor, employer, partner,
independent contractor,
5
<PAGE>
investor (other than as a holder solely as an investment of less than one
percent (1%) of the outstanding capital stock of a publicly traded corporation),
consultant, advisor, agent or otherwise.
(2) That during the Restricted Period and within the
Restricted Area, the Employee will not, directly or indirectly, compete with the
Company by soliciting, inducing or influencing any of the Company's clients
which have a business relationship with the Company at the time during the
Restricted Period to discontinue or reduce the extent of such relationship with
the Company.
(3) That during the Restricted Period and within the
Restricted Area, the Employee will not (A) directly or indirectly recruit,
solicit or otherwise influence any employee or agent of the Company to
discontinue such employment or agency relationship with the Company, or (B)
employ or seek to employ, or cause or permit any business which competes
directly or indirectly with the Business Activities of the Company (the
"Competitive Business") to employ or seek to employ for any Competitive Business
any person who is then ( or was at any time within six (6) months prior to the
date Employee or the Competitive Business employs or seeks to employ such
person) employed by the Company.
(4) That during the Restricted Period the Employee
will not interfere with, or disrupt or attempt to disrupt any past, present or
prospective relationship, contractual or otherwise, between the Company and any
customer, employee or agent of the Company.
7. Non-Disclosure of Confidential Information.
a. The Employee acknowledges that the Company's trade secrets,
private or secret processes, methods and ideas, as they exist from time to time,
customer lists and information concerning the Company's products, services,
business records and plans, inventions, product design information, price
structure, discounts, costs, computer programs and listings, source code and/or
subject code, copyright, trademark, proprietary information, formulae,
protocols, forms, procedures, training methods, development, technical
information, know-how, show-how, marketing activities and procedures, method for
operating of the Company's Business, credit and financial data concerning the
Company and the Company's Clients and client lists, which client lists shall not
only mean one or more of the names and addresses of the clients of the Company
but it shall also encompass any and all information whatsoever regarding them,
including their needs, and marketing and advertising practices and plans and
information which is embodied in written or otherwise recorded form, but it
shall also include information which is mental, not physical (collectively, the
"Confidential Information") are valuable, special and unique assets of the
Company, access to and knowledge of which have been provided to the Employee by
virtue of the Employee's employment with the Company. In light of the highly
competitive nature of the industry in which the Company's business is conducted,
the Employee agrees that all Confidential Information, heretofore or in the
future obtained by the Employee as a result of Employee's employment with the
Company shall be considered confidential.
b. The Employee acknowledges that, as between the Company and
Employee,
6
<PAGE>
the Confidential Information and any and all rights and privileges provided
under the trademark, copyright, trade secret and other laws of the United
States, the individual states thereof, and jurisdictions foreign thereto, and
the goodwill associated therewith, are and at all times will be the property of
the Company.
c. The Employee agrees that the Employee shall hold in
confidence and not disclose or make available to any third party any such
Confidential Information unless so authorized in writing by the Company;
exercise all reasonable efforts to prevent third parties from gaining access to
the Confidential Information; not use, directly or indirectly, the Confidential
Information in any respect of its business, except as necessary to evaluate the
information in order to perform Employee's duties and responsibilities to the
Company; restrict the disclosure or availability of the Confidential Information
to those who have read and understand this Agreement and who have a need to know
the information in order to achieve the purposes of this Agreement; not copy or
modify any Confidential Information without prior written consent of the
Company; provided, however, that such copy or modification of any Confidential
Information does not include any modifications or copying which would otherwise
prevent Employee from performing their duties and responsibilities to the
Company; take such other protective measures as may be reasonably necessary to
preserve the confidentiality of the Confidential Information; and relinquish and
require all of its employees to relinquish all rights it may have in any matter,
such as drawings, documents, models, samples, photographs, patterns, templates,
molds, tools or prototypes, which may contain, embody or make use of the
Confidential Information; promptly deliver to the Company any such matter as the
Company may direct at any time; and not retain any copies or other reproductions
thereof.
d. Excluded from the Confidential Information, and therefore
not subject to the provisions of this Agreement, shall be any information which
at the time of disclosure, is in the public domain as evidenced by printed
publications; After the disclosure, enters the public domain by way of printed
publication through no fault of Employee; Employee can show by written
documentation that the Confidential Information was in the Employee's possession
at the time of disclosure and which was not acquired directly or indirectly from
the Company; or Employee can show by written documentation was acquired, after
disclosure, from a third party who did not receive it from the Company, and who
had the right to disclose the information without any obligation to hold such
information confidential. The foregoing exceptions shall apply only from and
after the date that the information becomes generally available to the public or
is disclosed to the Employee by a third party, respectively. Specific
information shall not be deemed to be within the foregoing exceptions merely
because it is embraced by more general information in the public domain.
Additionally, any combination of features shall not be deemed to be within the
foregoing exceptions merely because individual features are in the public
domain. If the Employee intends to avail himself/herself of any of the foregoing
exceptions, the Employee shall notify the Company in writing of his/her
intention to do so and the basis for claiming the exception.
e. Employee further agrees that Employee shall promptly
disclose in writing to the Company all ideas, inventions, improvements and
discoveries which may be conceived,
7
<PAGE>
made or acquired by Employee as the direct or indirect result of the disclosure
by the Company of the Confidential Information to Employee; that all such ideas,
inventions, improvements and discoveries conceived, made or acquired by Employee
alone or with the assistance of others, relating to the Confidential
Information, shall be the property of the Company and shall be treated as
Confidential Information in accordance with the provisions hereof and that
Employee shall not acquire any intellectual property rights under this Agreement
except the limited right to use set forth in this Agreement; that Employee shall
assist in the preparation and execution of all applications, assignments and
other documents which the Company may deem necessary to obtain patents,
copyrights and the like in the United States and in jurisdictions foreign
thereto, and to otherwise protect the Company.
f. Upon written request of the Company, Employee shall return
to the Company all written materials containing the Confidential Information.
Employee shall also deliver to the Company written statements signed by Employee
certifying all materials have been returned within five (5) days of receipt of
the request.
8. Covenants as Essential Elements of this Agreement; Survival of
Covenants. It is understood by and between the parties hereto that the foregoing
covenants by Employee contained in Sections 6 (Covenant Not to Compete) and 7
(Non-Disclosure of Confidential Information) of this Agreement shall be
construed to be agreements independent of any other element of Employee's
relationship with the Company. The existence of any other claim or cause of
action, whether predicated on any other provision in this Agreement, or
otherwise, as a result of the relationship between the parties, shall not
constitute a defense to the enforcement of the covenants in this Agreement
against Employee.
9. Remedies.
a. The Employee acknowledges and agrees that the Company's
remedy at law for a breach or threatened breach of any of the provisions of
Section 6 (Covenant Not to Compete) or Section 7 (Non-Disclosure of Confidential
Information) herein would be inadequate and a breach thereof will cause
irreparable harm to the Company. In recognition of this fact, in the event of a
breach by the Employee of any of the provisions of Section 6 (Covenant Not to
Compete) or Section 7 (Non-Disclosure of Confidential Information), the Employee
agrees that, in addition to any remedy at law available to the Company,
including, but not limited to monetary damages, all rights of the Employee to
payment or otherwise under this Agreement and all amounts then or thereafter due
to the Employee from the Company under this Agreement may be terminated and the
Company, without posting any bond, shall be entitled to obtain, and the Employee
agrees not to oppose the Company's request for equitable relief in the form of
specific performance, temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be available to the
Company.
b. The Employee acknowledges that the granting of a temporary
injunction, temporary restraining order or permanent injunction merely
prohibiting the use of Proprietary Information would not be an adequate remedy
upon breach or threatened breach of Section 6
8
<PAGE>
(Covenant Not to Compete) or Section 7 (Non-Disclosure of Confidential
Information) and consequently agrees, upon proof of any such breach, to the
granting of injunctive relief prohibiting any form of competition with the
Company. Nothing herein contained shall be construed as prohibiting the Company
from pursuing any other remedies available to it for such breach or threatened
breach.
10. Public Statements. The Employee agrees not to directly or
indirectly publish, circulate, utter or disseminate, or cause to be published,
circulated, uttered or disseminated, in a manner or by any means whatsoever, to
any person or persons whomsoever, any statements, comments, or material
whatsoever, which could or would, in any manner whatsoever, either reflect
unfavorably on the reputation of the Company or harm, damage or impair the
business or operations of the Company unless required by law or by a valid order
of a court of competent jurisdiction.
11. Notices. Any notice required or permitted to be given under the
terms of this Agreement shall be sufficient if in writing and if sent postage
prepaid by registered or certified mail, return receipt requested; by overnight
delivery; by courier; or by confirmed telecopy, in the case of the Employee to
the Employee's last place of business or residence as shown on the records of
the Company, or in the case of the Company to its principal office as set forth
in the first paragraph of this Agreement, or at such other place as it may
designate.
12. Waiver. Unless agreed in writing, the failure of either party, at
any time, to require performance by the other of any provisions hereunder shall
not affect its right thereafter to enforce the same, nor shall a waiver by
either party of any breach of any provision hereof be taken or held to be a
waiver of any other preceding or succeeding breach of any term or provision of
this Agreement. No extension of time for the performance of any obligation or
act shall be deemed to be an extension of time for the performance of any other
obligation or act hereunder.
13. Completeness and Modification. This Agreement constitutes the
entire understanding between the parties hereto superseding all prior and
contemporaneous agreements or understandings among the parties hereto concerning
the Employment Agreement. This Agreement may be amended, modified, superseded or
canceled, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties or, in the case of a waiver, by the party to be charged.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one agreement.
15. Binding Effect/Assignment. This Agreement shall be binding upon the
parties hereto, their heirs, legal representatives, successors and assigns. This
Agreement shall not be assignable by the Employee but shall be assignable by the
Company in connection with the sale, transfer or other disposition of its
business or to any of the Company's affiliates controlled by or under common
control with the Company.
9
<PAGE>
16. Governing Law. This Agreement shall become valid when executed and
accepted by Company. The parties agree that it shall be deemed made and entered
into in the State of Florida and shall be governed and construed under and in
accordance with the laws of the State of Florida, without giving effect to any
conflicts of law provisions. Anything in this Agreement to the contrary
notwithstanding, the Employee shall conduct the Employee's business in a lawful
manner and faithfully comply with applicable laws or regulations of the state,
city or other political subdivision in which the Employee is located.
17. Further Assurances. All parties hereto shall execute and deliver
such other instruments and do such other acts as may be necessary to carry out
the intent and purposes of this Agreement.
18. Headings. The headings of the sections are for convenience only and
shall not control or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
19. Survival. Any termination of this Agreement shall not, however,
affect the ongoing provisions of this Agreement which shall survive such
termination in accordance with their terms.
20. Severability. The invalidity or unenforceability, in whole or in
part, of any covenant, promise or undertaking, or any section, subsection,
paragraph, sentence, clause, phrase or word or of any provision of this
Agreement shall not affect the validity or enforceability of the remaining
portions thereof.
21. Venue. Company and Employee acknowledge and agree that the U.S.
District for the Southern District of Florida, or if such court lacks
jurisdiction, the 15th Judicial Circuit (or its successor) in and for Palm Beach
County, Florida, shall be the venue and exclusive proper forum in which to
adjudicate any case or controversy arising either, directly or indirectly, under
or in connection with this Agreement and the parties further agree that, in the
event of litigation arising out of or in connection with this Agreement in these
courts, they will not contest or challenge the jurisdiction or venue of these
courts.
22. Construction. This Agreement shall be construed within the fair
meaning of each of its terms and not against the party drafting the document.
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<PAGE>
THE EMPLOYEE ACKNOWLEDGES THAT THE EMPLOYEE HAS READ ALL OF THE TERMS OF THIS
AGREEMENT, HAS HAD THE OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF HIS
OWN CHOICE, UNDERSTANDS THE AGREEMENT, AND AGREES TO ABIDE BY ITS TERMS AND
CONDITIONS.
IN WITNESS WHEREOF, the parties have executed this Agreement as of date
set forth in the first paragraph of this Agreement.
Witness: The Company:
VISUAL DATA CORPORATION
/s/ Pauline Schneider By: /s/ Randy S. Selman
--------------------- -------------------
Pauline Schneider Randy S. Selman, President
Witness: The Employee:
/s/ Joanne M.Tepper /s/ David E. Goodman
- --------------------- --------------------
David E. Goodman
11
<PAGE>
MEMO TO: Randy Selman
FROM: David Goodman
DATE: August 30, 1997
SUBJECT: Amendment to 8/15/97 Employment Agreement
This document (hereafter "Amendment") shall serve as confirmation of our August
29, 1997 discussion and shall amend my August 15, 1997 Employment Agreement. The
intent of this Amendment is to establish consistency of compensation benefits
among the three Executive Committee members. However, it is acknowledged by me
that you and Allan shall have the right to own and acquire larger holdings of
the Company Common Stock than me due to your employment seniority and key roles
in starting the Company.
Paragraph 4a. Base Salary. The current annual base salary of $125,000 shall be
increased to $137,500 on 1/1/98. Subsequent increases shall occur on each
October and shall be consistent with other Executive Committee members. The
current annual increase is ten percent (10%), however, this may be modified by
the Board.
Paragraph 4b. Bonus Compensation. I shall receive two percent (2%) of EBITDA on
an annualized basis, consistent with other Executive Committee members. However,
this may also be adjusted by the Board.
Paragraph 4c. Stock Options. Pursuant to the Employment Agreement, I shall
receive an initial right to purchase Options totaling 250,000 shares of Common
Stock at an exercise price of $6.00. However, the Exercise Period (vesting)
shall be adjusted as follows: The Initial Grant Date shall become September 30,
1997 (for 50,000 shares); the Second Grant Date shall be January 1, 1998 (for
50,000 shares); the Third Grant Date shall be September 30, 1998 (for 50,000
shares); the Fourth Grant Date shall be September 30, 1999 (for 50,000 shares);
and the Fifth Grant Date shall be September 30, 2000 (for 50,000 shares).
However, as stated in the Employment Agreement, should the Company's financial
targets, as defined by the Company, be realized as of the Third Grant Date,
which is now September 30, 1998, the Fourth and Fifth Grant Dates shall be
accelerated and vest on September 30, 1998.
If additional Options are granted to Executive Committee members, I will receive
Options to purchase additional shares of Common Stock at a rate of 1 Option for
2 for each of you and Allan, until you each received 930,000 total shares of
Common Stock (either owned or through the right to own options). Once each of
you have received shares or Options totaling 930,000 shares, I shall receive
Options at a rate of 1 to 1 for any Options received by you and Allan. I
acknowledge that this also may be modified by the Board.
Paragraph 4d. Automobile Allowance. Consistent with other Executive Committee
members.
1
<PAGE>
Randy Selman
August 30, 1997
Page 2
Paragraph 4e. Employee Benefits. Consistent with other Executive Committee
members.
Paragraph 4f. Vacation. Consistent with other Executive Committee members.
Paragraph 4g. Reimbursable Expenses. Consistent with other Executive Committee
members.
All other terms and conditions established in the Employment Agreement remain as
stated and the parties confirm same through execution of this Amendment.
IN WITNESS WHEREOF, the parties have executed this Amendment this October 20,
1997.
Witness: The Company:
VISUAL DATA CORPORATION
/s/ Pauline Schneider By: /s/ Randy S. Selman
- ----------------------------- --------------------------
Pauline Schneider Randy S. Selman, as President
Witness: The Employee:
/s/ Joanne M. Tepper /s/ David E. Goodman
- ----------------------------- ------------------------------
Joanne M. Tepper David E. Goodman
2
<PAGE>
EXHIBIT 10(ii)
CONTRACT FOR PURCHASE AND SALE OF REAL PROPERTY
THIS CONTRACT FOR PURCHASE AND SALE OF REAL PROPERTY is made as of this
____ day of __________, 1997, (hereinafter referred to as "Contract"), by and
between GATEWAY PARTNERS #2, LTD., Debtor in Possession, U.S. Bankruptcy Court
for the Southern District of Florida, Case No.: 97-20543-BKC-RBR, (hereinafter
referred to as "Seller"), and VISUAL DATA CORPORATION, a Florida corporation,
(hereinafter referred to as "Buyer') of the following described property upon
the terms and conditions as stated herein:
A portion of Parcels "B" and "C", Gateway Industrial Center
No. 22, according to the Plat thereof as recorded in Plat Book
103, Page 2 of the Public Records of Broward County, Florida,
being more particularly described as follows:
Beginning at the Northwest corner of said Parcel "B", thence
South 0(degrees)West, along the West line of said Parcel "B",
a distance of 254.25 feet; thence South 89(degrees) 46' 38"
East, a distance of 327.00 feet; thence North 0(degrees) 07'
20" East, a distance of 208.82 feet to a point on the North
line of said Parcel "C" and a point on a curve; thence
Northwesterly along a curve to the right and along the North
lines of said Parcels "C" and "B", having a radius of 694.00
feet and a central angle of 6(degrees) 11' 10", an arc
distance of 74.93 feet; thence North 89(degrees) 46' 38" West,
along the North line of said Parcel "B", a distance of 267.54
feet to the Point of Beginning,
Said lands situate, lying and being in Broward County, Florida,
Together with all rights, title and interest in and to that
certain Ingress and Egress Easement recorded in O.R. Book
9861, Page 300 and O.R. Book 9861, Page 301, Public Records of
Broward County, Florida. Also known as 1291 S.W. 29th Avenue,
Pompano Beach, Florida 33069.
(hereinafter referred to as the "Property").
1. Purchase Price. ONE MILLION FOUR HUNDRED SEVENTY-FIVE THOUSAND DOLLARS
($1,475,000.00).
2. Terms and Conditions of Sale. THIS SHALL BE AN ALL CASH SALE WITH ALL
DEPOSITS PAID HEREUNDER TO BE APPLIED TO THE PURCHASE PRICE.
1
<PAGE>
3. (a) Deposit. The initial deposit on the purchase shall be TEN THOUSAND
DOLLARS ($10,000.00), which sum shall be held in escrow by Atlas, Pearlman, Trop
& Borkson, P.A. (hereinafter referred to as "Escrow Agent").
(b) Additional Deposit. The Additional Deposit of ONE HUNDRED THIRTY-SEVEN
THOUSAND FIVE HUNDRED DOLLARS ($137,500.00) shall be delivered to the Escrow
Agent on or before June 30, 1997.
4. The Property and the improvements thereon are being sold in "AS IS" condition
without any representations or warranties.
5. The current years taxes will be prorated at closing based upon the previous
years taxes and there will be no re-proration upon rendition of the current year
bill. Taxes, insurance, interest, assessments, rents (including the monthly rent
to be paid by the Buyer) and other expenses or revenues of said Property shall
be prorated as of the closing date.
6. It is understood and agreed that the Property is being sold and purchased
subject to the restrictions and limitations of record common to the neighborhood
and subject to any easements for public utilities, which may be of record, or
may become liens through pending litigation before consummation of Contract.
7. Conveyance of the Property shall be by Debtor-in-Possession's Deed. A copy of
the deed is being provided with the Contract.
8. The Seller will provide a prior owner's title policy, together with a title
up-date, at the Buyer's cost and expense. The Seller makes no representation as
to the status of the title to the property except that if the Contract for Sale
and Purchase is approved by the United States Bankruptcy Court for the Southern
District of Florida in connection with the bankruptcy proceeding of GATEWAY
PARTNERS #2, LTD., Case No. 97-20543-BKC-RBR, that conveyance will be made by a
"Debtor-in-Possession's Deed" pursuant to the Order of the Bankruptcy Court,
free and clear of all liens, encumbrances and other adverse interests, except
for the years taxes and subject to restrictions, easements and limitations of
record.
9. The Buyer acknowledges that the Property is being purchased from Seller
subject to the existing lease with MCI in the Property which will be assigned at
closing. There is another lease on the property in favor of Computer Horizons,
Inc., which the tenant has terminated and the Buyer takes subject to the
tenant's rights under its terminated lease. Any penalty for early termination
shall vest with the Seller.
10. The Seller will file a Motion with the United States Bankruptcy Court for
the Southern District of Florida in connection with the Bankruptcy Case; GATEWAY
PARTNERS #2, LTD., Case No.: 97-20543-BKC-RBR, for authorization to sell the
real property which is the subject matter of this Contract, free and clear of
liens and other interests, to the Buyer. This Contract is contingent upon the
approval of the United States Bankruptcy Court for the Southern District of
Florida authorizing the sale of the property by the Seller to the Buyer free and
clear of liens and other interests. The sale is also subject to and contingent
upon the Seller giving notice to
2
<PAGE>
certain creditors and other interested parties as required by the Bankruptcy
Court and his/her/their not receiving any higher or better offers for the
purchase of the Property.
11. Property Information. Within seven (7) days following the execution hereof,
Seller will deliver to Buyer, to the extent they exist or are available to
Seller, the documents listed below (all of said documents sometimes collectively
herein referred to as the "Property Information") and Seller hereby warrants
such Property Information is true and correct (such warranty to survive the
"Closing"):
(a) A current rent roll reflecting prepaid rent, security
deposits, delinquencies, base rent escalations and percentage
rent, if any, and historical occupancy reports for the periods
covered by the financial statements and current year operating
statements;
(b) Copies of all leases and instruments modifying or extending
leases and access to lease files;
(c) As-built plans and specifications of all ongoing improvements
to the Property, including renovation schedules, contracts,
permits and cost breakdowns;
(d) All existing soil and environmental reports;
(e) All existing engineering reports, including, but not limited
to, existing and proposed structural, plumbing, electrical,
mechanical and civil;
(f) Copies of all maintenance, service, employment and vendor
contracts;
(g) Utility availability and capacity letters from the appropriate
authorities concerning water, waste water, electricity
telephone and gas to the extent the same may be obtained from
the relevant governing body;
(h) Copies of real estate tax bills and real estate tax
information for the current and three (3) preceding fiscal
years;
(i) The most recent metes and bounds, as-built and perimeter
surveys, as well as existing and proposed plot plans in the
Seller's possession;
(j) Copies of all pleadings for pending or notice of threatened
litigation affecting the Property;
(k) Certificates of Occupancy for the Property; and
3
<PAGE>
(l) Such other data, information, plans, files, letters and
materials pertaining to the renovation or operation of the
Property or the ownership or debt with respect to the Property
as Buyer shall reasonably request.
12. Mortgage Contingency and Feasibility Study.
(a) The Buyer shall have sixty (60) days from June 10, 1997,
(hereinafter referred to as "The Termination Date") to obtain a mortgage upon
terms and conditions acceptable to Buyer; and to perform a feasibility study and
inspect the Property and the Property Information. Buyer and its representatives
shall take reasonable precautions so that its inspections of the Property and
Property Information shall cause no damage to the Property. Any entry made on
the Property by Buyer or its representatives shall be upon reasonable notice to
Seller and at reasonable times and at the sole risk of Buyer. Buyer hereby
indemnifies and exonerates Seller from all losses, claims, liabilities, actions,
demands, costs, and expenses, including reasonable attorney and paralegal fees
and expenses, arising therefrom or in connection therewith, including any entry
upon the Property by agents or contractors of Buyer or their sub-agents or
sub-contractors. Buyer shall pay for all work and inspections performed on or in
connection with the Property and shall not permit the creation of any lien in
favor of any contractor, materialman, mechanic, surveyor, architect, laborer or
other lienor. Seller shall permit Buyer's agents, employees and consultants full
access to the Property and all financial, marketing and operating records.
(b) Buyer may inspect the Property, review the Property
Information and conduct such studies and tests with respect to the Property,
including, without limitation, environmental, structural and engineering studies
as Buyer may require. At any time through the Termination Date, the Buyer may,
based upon the results of such studies, its lease audit or otherwise, but in any
event in its sole and uncontrolled discretion, choose to refrain from proceeding
with acquisition of the Property. In such event, upon notice as set forth below,
this Contract shall become null and void and all Deposits shall be immediately
returned to the Buyer.
If the Buyer chooses to proceed with the acquisition
of the Property, the Deposit (together with any Additional Deposit and interest
thereon, if any, which may be paid) will become non-refundable and credited
against the Purchase Price at closing. If following the execution of this
Contract, but prior to the Termination Date, Buyer determines in its sole
discretion that the Property or any of the Property Information is not
satisfactory to Buyer, Buyer shall have the right to give written notice to
Seller and elect to terminate this Contract; provided such notice is postmarked
or delivered to Seller on or before the Termination Date. In the event that such
notice is given by Buyer in accordance with the foregoing, then in that event,
the Deposit and any interest thereon shall be promptly returned to Buyer, and
upon such repayment, this Contract shall terminate and Buyer shall promptly
deliver and return to Seller (at no cost or expense to Seller) all Property
Information and any plans, correspondence, surveys, drawings, and other
materials obtained by or on behalf of Buyer with respect to the Property. TIME
SHALL BE DEEMED OF THE ESSENCE FOR THE PURPOSES OF THIS SECTION WITH RESPECT TO
THE EXERCISE OF THE RIGHT TO TERMINATE BY BUYER
4
<PAGE>
HEREUNDER. If, for any reason, Buyer shall not timely exercise its right to
terminate prior to the Termination Date in accordance with the terms and
conditions of this paragraph, Buyer shall conclusively be deemed to have
approved all aspects of the Property and the Property Information, and have
agreed to purchase the Property in its "as-is" condition, "with all faults" as
of the Closing Date, and the right of Buyer to terminate under this paragraph
shall be deemed to have been waived by Buyer for all purposes hereof.
(c) Buyer's obligations under this paragraph shall survive the
Closing or the termination of this Contract.
13. Any escrow agent receiving funds or equivalent is authorized and
agrees by acceptance of them to deposit them promptly, hold same in escrow and,
subject to clearance, disburse them in accordance with terms and conditions of
this Contract. Failure of funds to clear shall not excuse Buyer's performance.
If in doubt as to Agent's duties or liabilities under the provisions of this
Contract, Agent may, at Agent's option, continue to hold the subject matter of
the escrow until the parties hereto agree to its disbursement or until a
judgment of a court of competent jurisdiction shall determine the rights of the
parties, or Escrow Agent may deposit same with the clerk of the circuit court
having jurisdiction of the dispute. Upon notifying all parties concerned of such
action, all liability on the part of Escrow Agent shall fully terminate, except
to the extent of accounting for any items previously delivered out of escrow. If
a licensed real estate broker, Escrow Agent will comply with provisions of
Chapter 475, F.S., as amended. Any suit between Buyer and Seller wherein Escrow
Agent is made a party because of acting as Escrow Agent hereunder, or in any
suit wherein Escrow Agent interpleads the subject matter of the escrow, Escrow
Agent shall recover reasonable attorney's fees and costs incurred with these
amounts to be paid from and out of the escrowed funds or equivalent and charged
and awarded as court costs in favor of the prevailing party. The Agent shall not
be liable to any party or person for misdelivery to Buyer or Seller of items
subject to the escrow, unless such misdelivery is due to willful breach of the
provisions of this Contract or gross negligence of Escrow Agent.
14. Closing. Closing Date shall be on or before fifteen (15) days from
the Termination Date. Closing shall take place at the law offices of Atlas,
Pearlman, Trop & Borkson, P.A., 200 East Las Olas Boulevard, Suite 1900, Fort
Lauderdale, Florida 33301.
15. Rent and Preclosing Occupancy. The Buyer shall have the obligation
to pay the Seller the sum of TEN THOUSAND DOLLARS ($10,000.00) per month (triple
net) from the date three (3) days following the approval by the Bankruptcy
Court, however, no earlier than June 10, 1997 (hereinafter referred to as the
Rent Period). During this Rent Period, the Buyer shall have the right to
possession of the Property (other than the premises under lease to MCI).
Payments shall be made each month on the commencement of the monthly anniversary
of the Rent Period. In the event the Buyer fails to make the payment within
three (3) days written notice from Seller from the rent due date, Buyer shall be
deemed to be in default under the terms of this Contract and Buyer agrees to
immediately vacate the Property. The full terms of the rental agreement are
attached hereto as Exhibit "A".
5
<PAGE>
16. Notice. Notice must be given by certified mail return receipt
requested, as follows:
To Seller: GATEWAY PARTNERS #2, LTD.
Copy To: REGGIE DAVID SANGER, P.A.
208 Southeast Ninth Street
Fort Lauderdale, Florida 33316
To Buyer: VISUAL DATA CORPORATION
Suite 3A
1600 South Dixie Highway
Boca Raton, Florida 33432
Attention: RANDY SELMAN
Copy To: ATLAS, PEARLMAN, TROP & BORKSON, P.A.
200 East Las Olas Boulevard
Suite 1900
Fort Lauderdale, Florida 33301
Attention: KENNETH P. WURTENBERGER, ESQ.
17. This Contract shall be binding upon both parties, the Seller and
the Buyer, their heirs, executors or assigns, when approved by the United States
Bankruptcy Court for the Southern District of Florida.
18. The Seller agrees subject to Bankruptcy Court approval to pay a
brokerage commission totaling six percent (6%) which shall be divided equally
between Byron Real Estate and Management Corporation and the Broker, Andy
Snieder, or in such amount as may be approved by the United States Bankruptcy
Court for the Southern District of Florida, said commission to be payable only
upon closing.
IN WITNESS WHEREOF, the parties hereto have duly executed this Contract
as of the dates set forth below.
BUYER:
VISUAL DATA CORPORATION
________________________________ BY:_____________________________
Witness Name:
________________________________ Title:
Witness
Date of Execution:_________________
6
<PAGE>
SELLER:
GATEWAY PARTNERS #2, LTD.
________________________________ BY:______________________________
Witness Name:
________________________________ Title:
Witness
Date of Execution:_________________
7
<PAGE>
ADDENDUM TO CONTRACT FOR PURCHASE AND SALE OF REAL PROPERTY
THIS IS AN ADDENDUM to that certain Contract for Purchase and Sale of
Real Property dated May 30, 1997, by and between GATEWAY PARTNERS #2, LTD.,
Debtor in Possession, U.S. Bankruptcy Court for the Southern District of
Florida, Case No.: 97- 20543-BKC-RBR, (hereinafter referred to as "Seller"), and
VISUAL DATA CORPORATION, a Florida corporation, (hereinafter referred to as
"Buyer").
1. The parties hereto agree that the Buyer shall have a thirty
(30) day extension (until July 30, 1997) to deliver the
Additional Deposit to the Escrow Agent.
2. The Seller will file a Motion with the U.S. Bankruptcy Court
for the Southern District of Florida, Case No.:
97-20543-BKC-RBR, for the approval of this extension by the
Bankruptcy Court.
3. The parties agree that all other terms and conditions of the
Contract for Purchase and Sale of Real Property shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this Addendum
as of the dates set forth below.
BUYER:
VISUAL DATA CORPORATION
________________________________ BY:_____________________________
Witness Name:
________________________________ Title:
Witness
Date of Execution:_________________
SELLER:
GATEWAY PARTNERS #2, LTD.
________________________________ BY:______________________________
Witness Name:
________________________________ Title:
Witness
Date of Execution:_________________
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Florida corporations
- --------------------
HotelView Corporation
CondoView Corporation
CareView Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financioal information extracted from the
financial statements of Visual Data Corporation for the year ended
September 30, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 2,554
<SECURITIES> 0
<RECEIVABLES> 84
<ALLOWANCES> 21
<INVENTORY> 0
<CURRENT-ASSETS> 2,712
<PP&E> 1,965
<DEPRECIATION> 103
<TOTAL-ASSETS> 4,588
<CURRENT-LIABILITIES> 365
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,247
<TOTAL-LIABILITY-AND-EQUITY> 4,588
<SALES> 193
<TOTAL-REVENUES> 193
<CGS> 0
<TOTAL-COSTS> 2,749
<OTHER-EXPENSES> 6
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,042
<INCOME-PRETAX> (3,574)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,574)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,574)
<EPS-PRIMARY> (1.42)
<EPS-DILUTED> (1.42)
</TABLE>
