<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 000-22849
VISUAL DATA CORPORATION.
------------------------
(Exact name of small business issuer as specified in its charter)
FLORIDA
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(State or other jurisdiction of incorporation or organization)
65-0420146
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(IRS Employer Identification No.)
1291 SW 29 Avenue, Pompano Beach, Florida 33069
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(Address of principal executive offices)
954-917-6655
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(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ].
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. As of August 11, 1999 the
registrant had issued and outstanding 8,234,420 shares of common stock.
Transitional Small Business Disclosure Format (check one);
Yes [ ] No [X]
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
INDEX TO FINANCIAL STATEMENTS
Page Number
-----------
Condensed Consolidated Balance Sheets at June 30, 1999
(Unaudited) and September 30, 1998 1
Condensed Consolidated Statements of Operations for the Nine Months
And Three Months Ended June 30, 1999 and 1998 (Unaudited) 2
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended June 30, 1999 and 1998 (Unaudited) 3
Notes to Unaudited Condensed Consolidated Financial Statements 4
<PAGE> 3
VISUAL DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
------------ -------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,699,157 $ 590,848
Restricted cash 100,000 20,000
Accounts receivable, net of allowance for
doubtful accounts of $26,978 and $57,941 at
June 30, 1999 (unaudited) and September 30, 1998, respectively 970,192 621,546
Prepaid expenses 388,864 347,888
Other current assets 555,351 168,109
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TOTAL CURRENT ASSETS 7,713,564 1,748,391
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PROPERTY, PLANT AND EQUIPMENT, NET 3,535,813 3,535,205
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED, NET 1,024,731 1,097,243
OTHER 9,626 13,249
------------ ------------
TOTAL ASSETS $ 12,283,734 $ 6,394,088
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,137,953 $ 831,585
Deferred revenue 327,260 131,576
Current portion of obligations under capital leases 14,840 17,147
Current portion of mortgage note payable 39,619 967,023
Line of credit 50,000 --
Notes payable 290,500 240,500
------------ ------------
TOTAL CURRENT LIABILITIES 1,860,172 2,187,831
------------ ------------
OBLIGATIONS UNDER CAPITAL LEASES,
NET OF CURRENT PORTION 5,476 15,058
MORTGAGE NOTE PAYABLE,
NET OF CURRENT PORTION 900,440 --
MINORITY INTEREST 1,088,743 306,506
STOCKHOLDERS' EQUITY:
Preferred Stock, Par Value $.0001 Per Share:
Authorized 5,000,000 Shares:
Series A Convertible Preferred Stock, Designated, 300 Shares Issued and
Outstanding -0- and 150 at June 30, 1999 (unaudited)
and September 30, 1998, respectively -- --
Series A-1 Convertible Preferred Stock, Designated 150 Shares
Issued and Outstanding -0- and 150 at June 30, 1999 (unaudited)
and September 30, 1998, respectively -- --
Common Stock, Par Value $.0001 Per Share;
Authorized 20,000,000 Shares; 6,757,595 and 3,732,100
Issued and Outstanding at June 30, 1999 (unaudited) and
September 30, 1998, respectively 676 373
Additional paid - in capital 22,718,413 13,494,945
Accumulated deficit (14,290,186) (9,610,625)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 8,428,903 3,884,693
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,283,734 $ 6,394,088
============ ============
</TABLE>
The accompanying notes to unaudited condensed consolidated financial statements
are an integral part of these consolidated balance sheets.
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<PAGE> 4
VISUAL DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
-------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue $ 3,306,852 $ 745,132 $ 1,188,951 $ 256,091
Operating Costs
Cost of sales 2,022,979 123,705 713,213 123,705
Selling, general
and administrative 3,289,101 978,138 1,387,379 432,821
Compensation and
related costs 1,476,011 918,367 548,779 337,536
Production 217,004 44,570 70,036 13,339
Occupancy 99,027 97,244 25,413 25,064
Professional and consulting fees 1,130,696 540,252 411,123 138,326
----------- ----------- ----------- -----------
TOTAL OPERATING COSTS 8,234,818 2,702,276 3,155,943 1,070,791
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (4,927,966) (1,957,144) (1,966,992) (814,700)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest income 85,486 59,854 52,003 13,154
Rental income 58,472 60,979 18,820 19,551
Interest expense (83,977) (69,447) (25,997) (25,267)
Minority interest 195,858 (3,021) 69,608 (3,021)
----------- ----------- ----------- -----------
TOTAL OTHER INCOME 255,839 48,365 114,434 4,417
----------- ----------- ----------- -----------
LOSS BEFORE TAXES (4,672,127) (1,908,779) (1,852,558) (810,283)
INCOME TAXES 7,434 -- 3,434 --
----------- ----------- ----------- -----------
NET LOSS $(4,679,561) $(1,908,779) $(1,855,992) $ (810,283)
=========== =========== =========== ===========
NET LOSS PER SHARE - BASIC AND
DILUTED $ (0.87) $ (0.61) $ (0.29) $ (0.25)
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES
OF COMMON STOCK OUTSTANDING 5,405,447 3,127,407 6,429,968 3,225,050
=========== =========== =========== ===========
</TABLE>
The accompanying notes to unaudited condensed consolidated financial statements
are an integral part of these consolidated financial statements.
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<PAGE> 5
VISUAL DATA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended June 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash used in operating activities $(3,879,524) $(1,609,159)
Cash used in investing activities (791) (843,733)
Cash provided by financing activities 8,988,624 641,984
----------- -----------
Net increase (decrease) in cash and cash equivalents 5,108,309 (1,810,908)
Cash and cash equivalents:
Beginning of period 590,848 2,554,180
----------- -----------
End of Period $ 5,699,157 $ 743,272
=========== ===========
</TABLE>
The accompanying notes to unaudited condensed consolidated financial statements
are an integral part of these consolidated financial statements.
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<PAGE> 6
VISUAL DATA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1: GENERAL
NATURE OF BUSINESS
Visual Data Corporation ("VDC" or the "Company") (NASDAQ:VDAT) and its wholly
owned subsidiaries are 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, eventually, Interactive
television ("ITV"). The information libraries contain short concise vignettes on
various topics such as travel, healthcare and medicine, nursing homes, timeshare
properties and business news. Currently the primary distribution channel for all
of VDC's libraries is the Internet.
EDnet, Inc. ("EDnet") (OTCBB:EDNT), a 51% owned subsidiary of VDC purchased in
June 1998, develops and markets integrated systems for the delivery, storage,
and management of professional quality digital communications for media-based
applications, including audio and video production for the U. S. entertainment,
advertising, newsroom and public relations industries. EDnet, through strategic
alliances with long-distance carriers, regional telephone companies, satellite
operators, and independent fiber optic telecommunications providers, has
established a worldwide network that enables the exchange of high quality audio,
video, multimedia, and data communications. It provides engineering services and
application-specific technical advice, audio, video, and networking hardware and
software as part of its business. EDnet's revenues represent approximately
$2,800,000 and $905,000 and $200,000 and $200,000 for the nine months and three
months ended June 30, 1999 and 1998, respectively, in the accompanying unaudited
condensed consolidated financial statements.
INTERIM FINANCIAL DATA
In the opinion of management, the accompanying unaudited financial statements
have been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. These financial statements do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. The annual financial statements of
the Company as of September 30, 1998 should be read in conjunction with these
statements. The financial information included herein has not been audited.
However, management believes the accompanying unaudited interim financial
statements contain all adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the consolidated financial position of
VDC and subsidiaries as of June 30, 1999 and the results of their operations for
the nine and three months ended June 30, 1999 and 1998 and cash flows for the
nine months ended June 30, 1999 and 1998. The results of operations and cash
flows for the period are not necessarily indicative of the results of operations
or cash flows for the year ending September 30, 1999.
NOTE 2: PER SHARE AMOUNTS
Net income per share is computed using the weighted average number of common
and dilutive common equivalent shares outstanding during the period. Common
equivalent shares consist of the incremental common shares issuable upon
exercise of stock options and warrants (using the treasury stock method). There
were options and warrants outstanding at June 30, 1999 and 1998 that could
potentially dilute earnings per share in the future. Such options and warrants
were not
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<PAGE> 7
included in the computation of diluted earnings per share because to do so would
have been antidilutive for all periods presented.
NOTE 3: REFINANCING OF MORTGAGE
In March 1999, the Company negotiated an extension of its mortgage note with the
lender. The term of the note was extended by forty two (42) months and is now
due on September 30, 2002. The note requires monthly payments of approximately
$10,000 and a balloon payment of approximately $800,000 at September 30, 2002.
NOTE 4: LINE OF CREDIT
In December 1998, the Company negotiated and guaranteed a $250,000 line of
credit for EDnet with Union Bank of California. The credit line bears interest
at the institution's published reference rate plus 2.5% and has a stated
maturity date of November 1, 1999.
NOTE 5: CONVERSION OF PREFERRED STOCK
In December 1998, the holders of VDC's Series A Convertible Preferred Stock and
Series A-1 Convertible Preferred Stock converted their shares into shares of the
Company's Common Stock pursuant to the designations, rights and preferences of
such securities. The 150 shares of Series A Convertible Preferred Stock and the
150 shares of the Series A-1 Convertible Preferred Stock, which represented 100%
of the issued and outstanding shares of those series of Preferred Stock, were
converted into an aggregate of 917,490 shares of Common Stock.
NOTE 6: PRIVATE PLACEMENT OF COMMON STOCK
In November and December 1998 the Company sold to 20 accredited investors a
total of 532,500 shares of its common stock for gross proceeds of $1,040,000. Of
these shares, a total of 332,500 were granted piggyback registration rights.
In February 1999, the Company completed a private placement of its common stock
to institutional investors. Net proceeds of approximately $2,600,000 were
received in exchange for 333,334 shares. These investors were granted piggyback
registration rights. In connection with the offering, the placement agent
received 8,334 one year warrants with an exercise price of $14.063. Pursuant to
the terms contained in an investment banking agreement executed in November
1998, the placement agent also received a total of 105,000 five year warrants
exercisable at prices ranging from $2.00 to $3.00.
NOTE 7: SALE OF EDNET'S IBS SUBSIDIARY
In December 1998, EDnet sold substantially all of the assets and certain of the
liabilities of its wholly-owned subsidiary, Internet Business Solutions, Inc.
("IBS"), for a sale price of $1,000,000. The assets sold included office and
computer equipment used by IBS in its business of web site development and
design, as well as receivables and certain other intangible assets. EDnet
recognized a gain of approximately $663,000 on the sale. The Company recorded
its portion of the gain, approximately $338,000, as a reduction of excess of
purchase price over net assets acquired.
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NOTE 8: SUBSEQUENT EVENT
In August 1999, the Company completed a secondary offering of 1,400,000 shares
of common stock which resulted in net proceeds of approximately $12,100,000. The
underwriters of the offering received a commission of 8%, a non-accountable
expense allowance of 1% and warrants to purchase 140,000 shares of the Company's
common stock at an exercise price of $16.50. The warrants are exercisable for a
period of four years beginning August 11, 2000. The Company is now listed on the
Nasdaq National Market System.
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<PAGE> 9
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THE FOLLOWING DISCUSSION REGARDING THE COMPANY AND ITS BUSINESS AND OPERATIONS
CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 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 INCLUDING, BUT NOT
LIMITED TO, THE GROWTH, RELIABILITY AND SPEED OF THE INTERNET, OUR DEPENDENCE ON
THIRD PARTY PROVIDERS AND WEBSITE OPERATORS AND OUR DEPENDENCE ON CERTAIN
CONTRACTS, SOME OF WHICH ARE SHORT TERM. 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.
GENERAL
We are a leading producer and owner of original video content specifically
developed for the Internet and interactive television. We are also a leading
aggregator and broadcaster of rich media (audio and video) content. Our content
includes video libraries on topics such as travel, corporate information and
healthcare. Our growing portfolio of full-motion video information libraries is
designed to target specific audiences in order to generate revenues from
advertising, subscriptions, viewership, e-commerce and sponsorships.
As the Company continued with its integration of EDnet, it became apparent that
the web development resources at Internet Business Solutions, Inc. ("IBS"),
EDnet's wholly-owned subsidiary, duplicated existing facilities at Visual Data.
On December 11, 1998, as part of the decision to re-focus its activities on
audio/video digital transmission and webcasting activities, EDnet completed the
sale of substantially all of the assets of IBS for a total of $1,000,000. EDnet
recognized a gain of approximately $663,000 on the sale. The Company recorded
its portion of the gain, approximately $338,000 as a reduction of excess of
purchase price over net assets acquired. While the sale of IBS assets has
reduced revenues, EDnet intends to offset this loss with the continued growth of
its core audio networking business and the aggressive marketing of its video
networking services that were introduced during the Spring of 1999.
The Company's current plan of operation includes continuing to expand the
marketing of its "View" libraries, the development of new products and
continuing to look for synergistic acquisition opportunities. During the first
quarter of fiscal 1999, the Company began offering a new service through its
Video News Wire division. By combining Ednet's worldwide high speed data
networks and the Company's network of camera crews, the Company is able to
provide its clients with live audio and video event broadcast capabilities via
the Internet. This service is being marketed through the Company's partnership
with PR Newswire. During the second quarter of fiscal 1999, the Company's
MedicalView division began creating and distributing Internet-based video
programs for physicians, health care professionals and consumers. The Company's
TalentView(R) division launched its websiTe in March 1999. TalentView's(R)
initial online service, A* Cappella, is a searchable, multimedia talent library
of professional voice performers working in film, television, radio and other
media applications. In March 1999, the Company also launched VideoViewer
(www.videoviewer.com), an interactive video-on-
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<PAGE> 10
demand network for high bandwidth Internet users. VideoViewer is a
self-contained online network designed to offer a wide range of video
programming on a variety of subjects including hotels and resorts, health care
and medicine, business and finance and entertainment. In April 1999, the Company
licensed the Internet broadcast rights to a collection of golf-related videos
including approximately 200 course tours, instructional videos and golf-related
attractions from an unaffiliated third party. GolfCourseView(TM), which is
available on www.videoviewer.com, provides full-motion tours of some of the
world's most renowned golf courses and resorts and related attractions,
including Pebble Beach, Innisbrook and the Golf Hall of Fame, as well as
instructional videos and golf products and services. Also in April, EDnet
introduced new services including sales of the Telestream "ClipMail Pro" high
quality video delivery system and video networking where they will provide high
speed bandwidth connections via DSL and frame relay T1 to ClipMail Pro systems.
In May 1999, the Company signed an agreement with Broadcast.com, whose
acquisition by Yahoo, Inc. was concluded in July 1999, to create a travel
channel on the Broadcast.com website which receives over one million viewers
daily. The channel offers video tours and previews of hotels, resorts, timeshare
properties, golf courses and attractions by linking to the Company's video
libraries.
In conjunction with our Video News Wire service, we are currently developing a
corporate news broadcast site on the Internet called TheFirstNews.com. The goal
of the new site is to provide a continuous audio stream of corporate news as it
is released over the various wire services. Users of this service will be able
to listen to all the news stories of the day or identify specific industries or
individual stocks they wish to be informed about. The launch of this new service
is planned for the fourth quarter of fiscal 1999.
RESULTS OF OPERATIONS
The Company recognized revenue of approximately $3,306,900 for the nine months
ended June 30, 1999, an increase of $2,561,800 (344%) from $745,100 for the same
period last year. Revenues for the three months ended June 30, 1999 totaled
approximately $1,189,000, an increase of $932,900 or 364% over revenues of
$256,100 for the same period in fiscal 1998. Revenues from EDnet accounted for
approximately $2,800,000 and $905,000, for the nine months and three months
ended June 30, 1999, respectively. The balance of the Company's revenue came
from HotelView's new and renewal contracts, initial contracts signed by CareView
and ResortView and fees earned by Video News Wire, which experienced significant
growth in live audio and video webcasting. Production and distribution revenue
decreased from approximately $545,000 to $510,000 for the nine months ended June
30, 1999. This was due to the net effect of an increase in recurring revenue and
a decrease due to a non-recurring marketing fee of $250,000 which the Company
recorded in March of 1998. For the three months ended June 30, 1999, production
and distribution revenue was approximately $284,000, an increase of $228,000
(407%) over $56,000 for the same period last year. EDnet experienced a decrease
of approximately $42,000 (4%) and $193,000 (6%) in its revenues for the three
months and nine months ended June 30, 1999 as compared to the same periods last
year due to the sale of its subsidiary IBS, which accounted for approximately
$613,000 in sales during that nine month period in 1998. This decrease has been
somewhat offset by the increase in revenues from audio equipment sales, usage
fees and revenues recognized from EDnet's webcasting services.
Cost of sales, which includes equipment and services, is wholly attributable to
sales by EDnet. Production costs increased by approximately $172,500 (388%) from
$44,500 to $217,000 for the nine months ended June 30, 1999 and $57,000 (439%)
from $13,000 to $70,000 for the three months then ended. This increase was due
to an increase in production activity, as well as the recognition of some
deferred costs due to the completion of certain contracts.
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<PAGE> 11
Selling, general and administrative expenses, which include advertising,
depreciation, telephone and travel, increased approximately $2,311,000 (236%)
from $978,000 to $3,289,000 the nine months ended June 30, 1999 as compared to
the same period last year. Approximately $1,213,000 of the increase was due to
the increase of EDnet's expenses included in the financial statements. In 1999,
this amount totaled approximately $1,280,000, nine months of expense, while in
1998, it included approximately $66,600, or ten days of expense, as the purchase
was effective as of June 20, 1998. Depreciation expense increased approximately
$336,800 (283%), from $119,000 to $455,800, advertising and associated expense
increased approximately $159,000 (115%) from $138,000 to $297,000, Internet
related expense increased approximately $72,000 (288%) from $25,000 to $97,000
and the balance reflects overall increases due to website development, as well
as the rollout of the other libraries and related websites.
Compensation and related costs increased by approximately $558,000 (61%) from
$918,000 to $1,476,000 and $211,500 (63%) from $337,500 to $549,000 for the nine
months and three months ended June 30, 1999, respectively, over comparable
periods last year due to growth in both sales and technical staff. Professional
fees increased approximately $591,000 (109%) from $540,000 to $1,131,000 and
$273,000 (198%) from $138,000 to $411,000 for the nine months and three months
ended June 30, 1999, respectively over comparable periods last year primarily
due to an increase in non-cash consulting and investment banking fees.
LIQUIDITY AND CAPITAL RESOURCES
In March 1999, the Company negotiated an extension of its mortgage with the
current lender. The term of the note was extended by forty two (42) months and
is now due on September 30, 2002. The note requires monthly payments of
approximately $10,000 and a balloon payment of approximately $800,000 at
September 30, 2002.
At June 30, 1999 the Company had working capital of approximately $5,854,000.
This was primarily a result of two private placements and the exercise of
options and warrants. One private placement occurred during the first quarter of
fiscal 199 in which a total of 532,500 shares were sold at approximately $2.00
per share to 20 accredited investors for which the Company received gross
proceeds of $1,040,000. In February 1999, the Company received net proceeds of
approximately $2,600,000 from the sale of its common stock to institutional
investors in the second private placement, selling a total of 333,334 shares.
Registration rights were granted to the investors in both transactions. The
Company has realized approximately $4,776,000 of net proceeds from the exercise
of options and warrants during the nine months ended June 30, 1999.
In August 1999, the Company completed a secondary offering of 1,400,000 shares
of common stock which resulted in net proceeds of approximately $12,100,000. The
underwriters of the offering received a commission of 8%, a non-accountable
expense allowance of 1% and warrants to purchase 140,000 shares of the Company's
common stock at an exercise price of $16.50. The warrants are exercisable for a
period of four years beginning August 11, 2000. The Company is now listed on the
Nasdaq National Market System.
The Company believes it has sufficient working capital to fund its current plan
of operations until its subsidiaries begin producing revenues sufficient to
sustain operations, for at least the next twelve months. However, in the event
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.
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<PAGE> 12
YEAR 2000 COMPLIANCE
The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The year 2000 issue
relates to whether computer systems will properly recognize and process
information relating to dates in and after the year 2000. These systems could
fail or produce erroneous results if they cannot adequately process dates beyond
the year 1999 and are not corrected. Significant uncertainty exists in the
software industry concerning the potential consequences that may result from the
failure of software to adequately address the year 2000 issue. The Company has
reviewed all software and hardware used internally by the Company in all support
systems to determine whether they are year 2000 compliant. Almost all of the
Company's software and hardware has already been upgraded by the manufacturer or
was recently purchased and is year 2000 compliant. The Company expects to have
its remaining year 2000 compliant systems in place by September 1999. The
Company also intends to implement and test these solutions prior to any
anticipated impact of the year 2000 issue on its systems. The Company does not
believe that the aggregate cost for the year 2000 issue will be material. The
Company, however, cannot predict the effect of the year 2000 issue on entities
with which the Company transacts business, and there can be no assurance that
the effect of the year 2000 issue on such entities will not have a material
adverse effect on the Company's business, financial condition or results of
operations. The Company will be formulating a contingency plan with respect to
such entities with which it does business.
In addition, we utilize third-party equipment, software and content, including
non-information technology systems, such as our security system, building
equipment and non-capital IT systems embedded microcontrollers that may not be
year 2000 compliant. We are in the process of developing a plan to assess
whether these third parties are adequately addressing the year 2000 issue and
whether any of our non-IT systems have material year 2000 compliance problems.
Failure of such third-party equipment, software, or content to operate properly
with regard to the year 2000 and thereafter could require us to incur
unanticipated expenses to remedy any problems, which could have a material
adverse effect on our business, results of operations, and financial condition.
Any new software, hardware or support systems implemented in the future will be
year 2000 compliant or will have updates or upgrades or replacements available
before the year 2000 to enable the system to be year 2000 compliant. Management
is currently assessing the year 2000 compliance expense and related potential
effect on the Company's earnings. To date, the Company has not incurred any
significant incremental expense directly related to year 2000 compliance.
INTERNET RELATED RISKS
The Company recognizes the current demand for the Internet may not continue to
grow at the current rate or it may change in the future as technology continues
to evolve. The Company produces and markets video content and currently uses the
Internet as the primary distribution network for its products. Changes in the
network infrastructure could also impact the short-term marketing of the
Company's products. The Company believes that its content is adaptable to
technology evolution and can be distributed via other media though there can be
no assurance how expediently the Company could respond if the change or increase
in distribution channels does not occur as part of the Company's internally
developed plans.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
Sale of Securities. In August 1999, the Company concluded a secondary
offering of 1,400,000 shares of common stock which resulted in net proceeds of
approximately $12,100,000. The underwriters of the offering received a
commission of 8%, a non-accountable expense allowance of 1% and warrants to
purchase 140,000 shares of the Company's common stock at an exercise price of
$16.50. The warrants are exercisable for a period of four years beginning August
11, 2000.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
None
<PAGE> 14
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Visual Data Corporation,
a Florida corporation
Date: August 20, 1999 /s/ Randy S. Selman
-------------------------
Randy S. Selman,
President, Chief Executive Officer
/s/ Pauline Schneider
-------------------------------
Pauline Schneider
Chief Financial Officer,
Principal Financial and
Accounting Officer
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VISUAL DATA CORPORATION FOR THE NINE MONTHS ENDED
JUNE 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 5,699
<SECURITIES> 0
<RECEIVABLES> 997
<ALLOWANCES> 27
<INVENTORY> 0
<CURRENT-ASSETS> 7,714
<PP&E> 5,142
<DEPRECIATION> 1,607
<TOTAL-ASSETS> 12,284
<CURRENT-LIABILITIES> 1,860
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 22,718
<TOTAL-LIABILITY-AND-EQUITY> 12,284
<SALES> 3,307
<TOTAL-REVENUES> 3,307
<CGS> 0
<TOTAL-COSTS> 8,235
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84
<INCOME-PRETAX> (4,672)
<INCOME-TAX> 7
<INCOME-CONTINUING> (4,680)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,680)
<EPS-BASIC> (.87)
<EPS-DILUTED> (.87)
</TABLE>
