-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Gb3lYiGyKc2we7WlwYER7G7I23RsT3VTjWUJvBcPwsdMKWT58oRZcfuUxYh0GRjZ UepjityhRKphYAaXSTleCA== 0000950144-01-502724.txt : 20010522 0000950144-01-502724.hdr.sgml : 20010522 ACCESSION NUMBER: 0000950144-01-502724 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010521 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VISUAL DATA CORP CENTRAL INDEX KEY: 0000919130 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PUBLISHING [2741] IRS NUMBER: 650420146 STATE OF INCORPORATION: FL FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-22849 FILM NUMBER: 1644822 BUSINESS ADDRESS: STREET 1: 1291 SW 29 AVE STREET 2: STE 3A CITY: POMPANO BEACH STATE: FL ZIP: 33069 BUSINESS PHONE: 9549176655 MAIL ADDRESS: STREET 1: 1600 S DIXIE HIGHWAY STREET 2: SUITE 3A CITY: BOCA RATON STATE: FL ZIP: 33432 10QSB 1 g69505e10qsb.txt VISUAL DATA CORP. FORM 10-QSB 3-31-2001. 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 March 31, 2001 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------- ----------- Commission file number 000-22849 VISUAL DATA CORPORATION ----------------------------------------------- (Exact name of small business issuer as specified in its charter) FLORIDA ----------------------------------------------- (State or other jurisdiction of incorporation or organization) 65-0420146 (IRS Employer Identification No.) 1291 SW 29 AVENUE, POMPANO BEACH, FLORIDA 33069 ----------------------------------------------- (Address of principal executive offices) 954-917-6655 --------------------------- (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 May 1, 2001 the registrant had issued and outstanding 11,770,543 shares of common stock. Transitional Small Business Disclosure Format (check one); Yes ( ) No (x) 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. INDEX TO FINANCIAL STATEMENTS
Page Number ----------- Table of Contents 1 Condensed Consolidated Balance Sheets At March 31, 2001 (Unaudited) and September 30, 2000 2 Condensed Consolidated Statements of Operations for the Six Months and Three Months Ended March 31, 2001 and 2000 (Unaudited) 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2001 and 2000 (Unaudited) 5 Notes to Unaudited Condensed Consolidated Financial Statements 6-18
1 3 VISUAL DATA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, September 30, 2001 2000 ------------ ------------- (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 907,281 $ 3,457,784 Restricted cash 326,112 316,546 Accounts receivable, net of allowance for doubtful accounts of $214,068 and $268,433, respectively 1,669,413 1,464,135 Prepaid expenses 1,590,186 427,306 Inventories, net of allowance for inventory obsolescence of $538,000 480,821 508,284 Deferred marketing costs 646,192 -- Other current assets 214,399 -- ------------ ------------ Total current assets 5,834,404 6,174,055 PROPERTY, PLANT AND EQUIPMENT, Net 4,017,181 3,795,656 INTANGIBLE ASSETS, Net 5,125,949 581,018 OTHER NON-CURRENT ASSETS 50,227 279,583 ------------ ------------ Total assets $ 15,027,761 $ 10,830,312 ============ ============
(Continued) 2 4 VISUAL DATA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
March 31, September 30, 2001 2000 ------------ ------------- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 2,480,390 $ 1,931,374 Accrued membership liability 1,422,151 -- Deferred revenue 863,255 499,234 Current portion of obligations under capital leases 18,204 4,045 Current portion of mortgage note payable 46,149 44,181 Notes payable - related party 125,000 125,000 ------------ ------------ Total current liabilities 4,955,149 2,603,834 MORTGAGE NOTE PAYABLE, net of current portion 825,313 848,891 CAPITAL LEASE OBLIGATIONS, net of current portion 28,711 -- NOTES PAYABLE - 6% CONVERTIBLE DEBENTURES 1,263,129 -- COMMITMENTS AND CONTINGENCIES (Notes 1, 7 and 8) STOCKHOLDERS' EQUITY: Common Stock, par value $.0001 per share; authorized 50,000,000 shares, 11,763,543 and 8,453,358 issued and outstanding, respectively 1,176 845 Additional paid-in capital 41,814,163 35,547,326 Accumulated deficit (33,859,880) (28,170,584) ------------ ------------ Total stockholders' equity 7,955,459 7,377,587 ------------ ------------ Total liabilities and stockholders' equity $ 15,027,761 $ 10,830,312 ============ ============
The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these consolidated balance sheets. 3 5 VISUAL DATA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Six Months Ended March 31, Three Months Ended March 31, --------------------------------- --------------------------------- 2001 2000 2001 2000 ------------ ------------ ------------ ------------ REVENUE $ 4,036,086 $ 3,028,147 $ 2,335,876 $ 1,626,564 COST OF REVENUE 3,257,316 3,400,835 1,842,594 1,780,524 ------------ ------------ ------------ ------------ GROSS PROFIT (LOSS) 778,770 (372,688) 493,282 (153,960) OPERATING EXPENSES: General and administrative 4,282,789 2,408,482 2,680,933 1,306,024 Sales and marketing 1,823,340 2,640,947 803,027 1,208,771 ------------ ------------ ------------ ------------ Total operating costs 6,106,129 5,049,429 3,483,960 2,514,795 ------------ ------------ ------------ ------------ Loss from operations (5,327,359) (5,422,117) (2,990,678) (2,668,755) OTHER INCOME (EXPENSE): Interest income 70,138 326,797 25,762 149,650 Rental and other income, net 40,968 35,060 25,345 15,033 Interest expense (473,043) (62,985) (134,251) (31,242) Minority interest -- 269,477 -- 154,486 ------------ ------------ ------------ ------------ Total other income (expense) (361,937) 568,349 (83,144) 287,927 ------------ ------------ ------------ ------------ Net loss $ (5,689,296) $ (4,853,768) $ (3,073,822) $ (2,380,828) ============ ============ ============ ============ Weighted average shares of common stock outstanding 9,356,982 8,468,925 10,280,686 8,481,184 ============ ============ ============ ============ Net loss per share - basic and diluted $ (.61) $ (.57) $ (.30) $ (.28) ============ ============ ============ ============
The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these consolidated financial statements. 4 6 VISUAL DATA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31, (Unaudited)
2001 2000 ------------ ------------ Cash flows used in operating activities $ (5,325,369) $ (5,008,851) Cash flows used in investing activities (959,555) (860,133) Cash flows provided by financing activities 3,734,421 147,439 ------------ ------------ Net decrease in cash and cash equivalents (2,550,503) (5,721,545) Cash and cash equivalents, beginning of period 3,457,784 15,573,644 ------------ ------------ Cash and cash equivalents, end of period $ 907,281 $ 9,852,099 ============ ============
The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these consolidated financial statements. 5 7 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Visual Data Corporation ("VDC" or the "Company") is comprised of five operating groups; Visual Data Travel Group, Visual Data On-line Broadcast and Production Group, Visual Data Networking Solutions Group, Visual Data Financial Solutions Group and Visual Data Golf, Leisure and Syndication Group. VDC is a full service provider of streaming-content applications, production services and media solutions, primarily in the United States. Using advanced technology and information solutions, the Company provides a sensory-rich experience to businesses and consumers enabling them to make superior decisions. The Company has developed a substantial library containing short concise vignettes on various topics such as travel, medicine, finance and corporate information. The Company also contains a golf publication and e-commerce division that provides benefits to the Company's members. During the six months and three months ended March 31, 2001 and 2000, the primary distribution channel for all of VDC's libraries was the Internet. VDC and its wholly-owned subsidiaries are Florida corporations. Entertainment Digital Network, Inc. ("Ednet"), a Delaware corporation and a 51% owned subsidiary of VDC, 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 United States entertainment industry. 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. On February 27, 2001, the Company completed the acquisition of 100% of the outstanding stock of SportSoft Golf, Inc. SportSoft Golf, Inc. was merged with Golf Society of the U.S., a wholly owned subsidiary of the Company. The accompanying financial statements reflect the consummation of the acquisition as of January 1, 2001. The Company has incurred losses since its inception, has an accumulated deficit of $33,859,880 at March 31, 2001, and its operations have been financed primarily through the issuance of equity. The Company's liquidity has substantially diminished because of such continuing operating losses and the Company may be required to seek additional capital to continue operations. During fiscal year 2000, the Company instituted a cost containment program for its operations as well as reduced its employee head count to conserve its cash resources. The Company has also implemented its marketing and sales plan to maintain a certain number of key sales representatives. These efforts are expected to result in increased revenues for fiscal year 2001 and reduced operating expenses. 6 8 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) In the first quarter of fiscal year 2001 the Company appointed a new COO and CFO and implemented an expense reduction program to take effect by the second quarter of fiscal 2001. The expense constraints were implemented across all of the Company's operations and resulted in a reduction in headcount and operating expenses. These budget constraints resulted in an expense structure appropriate with the ongoing sales achievements while still allowing the Company to move forward with a progressive plan in the marketplace. Management believes that in fiscal year 2001, the Company will achieve improvements in expense controls, sales infrastructure and product acceptance. Management's focus and commitment in fiscal year 2001 is to maintain expense controls while optimizing sales execution in the field and developing widespread market acceptance. BASIS OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of VDC and its subsidiaries, HotelView Corporation ("HotelView"), CareView Corporation ("CareView"), Video News Wire Corporation, ResortView Corporation ("ResortView"), AttractionView Corporation, MedicalView Corporation, TheFirstNews.com, Inc., Golf Society of the U.S. and Ednet. All significant intercompany accounts and transactions have been eliminated in consolidation. VDC has recognized the minority interest's 49% share of the ownership in Ednet in the accompanying consolidated financial statements, net of the minority interest's 49% share in Ednet's cumulative net losses. The minority interest's 49% share in Ednet's cumulative net losses through March 31, 2001 and September 30, 2000 was in excess of the minority interest's original investment by approximately $218,000 and $174,000, respectively. VDC has eliminated the minority interest liability to zero in the accompanying consolidated balance sheets and is currently including 100% of Ednet's losses. VDC will restore the minority interest's 49% share in Ednet when and if the cumulative earnings in Ednet become positive. ACCOUNTING ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States, requires management to make 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. COMPREHENSIVE INCOME OR LOSS The Company has no components of other comprehensive income or loss, accordingly, net loss equals comprehensive loss for all periods presented. 7 9 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) EARNINGS PER SHARE For the six months and three months ended March 31, 2001 and 2000, 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. The total outstanding options and warrants, which have been excluded from the calculation of loss per share, was 10,883,556 at March 31, 2001. EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS In June 1998 and June 1999, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and SFAS 137, Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133, as amended. These statements require companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives are to be accounted for depending upon the use of the derivative and whether it qualifies for hedge accounting. SFAS 133, as amended was adopted by the Company on October 1, 2000. Adoption of the Statement had an immaterial impact on the Company's consolidated financial position and results of operations. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial Statements. SAB 101 is required to be adopted no later than the fourth fiscal quarter of the Company's fiscal year ending September 30, 2001. Management believes that the adoption of SAB 101 will not have a significant impact on its consolidated financial position or results of operations. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to the current year presentation. INTERIM FINANCIAL DATA In the opinion of management, the accompanying unaudited condensed consolidated 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, 2000 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 March 31, 2001 and the results of their operations and cash flows for the six months and three months ended March 31, 2001 and 2000. The results of operations and cash flows for the period are not necessarily indicative of the results of operations or cash flows that can be expected for the year ending September 30, 2001. 8 10 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 NOTE 2: NOTES PAYABLE - 6% DEBENTURE In December 2000 the Company sold an aggregate of $2,040,000 principal amount of 6% Convertible Debentures to two unaffiliated third parties who were accredited investors in a transaction exempt from registration under the Securities Act of 1933 in reliance on Section 4(2) and Regulation D promulgated under such act. The 6% Convertible Debentures mature on December 8, 2003 and are convertible, in whole or in part, at the option of the holders into shares of VDC common stock at a conversion price equal to the lesser of (i) $2.13 per share, or (ii) 90% of the average of the three lowest closing bid prices for the 20 trading days prior to conversion (the "variable conversion price"). The conversion price of the 6% Convertible Debentures shall not be less than $.90 per share; provided that this floor price will be reset to 50% of the variable conversion price on December 8, 2001. In accordance with the provisions of the Emerging Issues Task Force ("EITF") issue 98-5, the $226,667 value of beneficial conversion was recoded as additional interest expense upon issuance of the 6% Convertible Debentures. In conjunction with this transaction, the Company issued the purchasers (i) a one year warrant to purchase an aggregate of 500,000 shares of VDC common stock at an exercise price of $4.00 per share, and (ii) a five year warrant to purchase an aggregate of 250,000 shares of VDC common stock at an exercise price of $2.13 per share (collectively, the "Warrants"). The warrants include a cashless exercise feature in the event the Company is unable to register the common stock underlying the warrants. In accordance with the provisions of EITF 96-13, the warrants are classified as a liability in the accompanying consolidated balance sheet and changes in the fair value of the warrants are recorded through income. On January 23, 2001, the Company sold an additional 800,000 shares of common stock for $1.25 per share. As a result of the anti-dilution provisions of the Warrants, the number of shares issuable upon the exercise of the five year warrants has been increased to 259,375 shares and the exercise price of the one-year warrants has been reduced to $2.053 per share. On January 25, 2001 Halifax Fund LP and Paladin Opportunity Fund LLP, holders of the Company's 6% Convertible Debentures converted $800,000 of principal and $6,312 of accrued interest into 803,470 shares of the Company's common stock at a conversion price of $1.003 per share pursuant to the terms of the debentures in a a private transaction exempt from registration under the Securities Act of 1933 in reliance on Section 4(2) of such act. After this conversion, an aggregate of $1,240,000 principal amount of 6% Convertible Debentures remain outstanding. In the event that the market price of VDC common shares shall be less than $1.50 per share for 20 consecutive trading days, at the Company's option all or a portion of the 6% Convertible Debentures are redeemable in an amount equal to 115% of the Outstanding Principal Amount (as that term is defined in the 6% Convertible Debenture) plus all accrued but unpaid interest and all Delay Payments (as that term is defined in the 6% Convertible Debenture), subject to certain conditions. VDC's redemption right shall, if exercised, be irrevocable, may be exercised no more than twice and may not be exercised again until three months after the first redemption closing date. 9 11 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 NOTE 2: NOTES PAYABLE - 6% DEBENTURE (Continued) The notice of redemption must be delivered by the Company within not less than five nor more than 20 trading days of such redemption triggering event (the "Redemption Closing Date"). VDC's right of redemption cannot be exercised if: - there is an Event of Default (as that term is defined in the 6% Convertible Debenture) or an event which, with the giving of notice or the passage of time or both would constitute an Event of Default under any 6% Convertible Debenture; or - there is an effective registration statement with respect to the share issuable upon the conversion of or as interest on the 6% Convertible Debentures. In addition, the holders of the 6% Convertible Debentures have the right to convert the debentures at any time until the Redemption Closing Date. Commencing on the effective date of a registration statement covering the common shares underlying the convertible debentures and related warrants, VDC has the right to sell to the purchasers an additional $1,000,000 principal amount of 6% Convertible Debentures. In the put right, the obligation of the purchasers to purchase these securities is several and not joint, and shall be allocated pro rata based upon the amount of 6% Convertible Debentures and Warrants purchased. NOTE 3: THEFIRSTNEWS.COM STOCK OFFERING In December 2000, TheFirstNews.com, Inc. ("TFN"), a subsidiary of the Company, in a private offering sold Units, each Unit consisting of 10,000 shares of TFN common stock and 20,000 shares of TFN 10% redeemable, convertible preferred stock. The purchase price for each unit was $50,000. TFN received net proceeds of approximately $.8 million. TFN has the right to redeem each block of 20,000 shares of preferred stock included in each Unit, at any time from the closing of the offering until 12 months thereafter, after providing the holder with 10 days notice, for $50,000 per 20,000 shares of preferred stock plus accrued and unpaid interest. In the event TFN fails to redeem the preferred stock within 12 months after the closing of the offering, the preferred stock shall be automatically converted into common stock at the conversion rate of one share of preferred stock for one share of common stock. In the event TFN fails to either file a registration statement under the Securities Act of 1933, as amended, with the Securities and Exchange Commission for the public offering of TFN's common stock within 12 months of the closing of the offering, or such registration statement has not been declared effective within six months of its initial filing with the Securities and Exchange Commission, the investors shall have the right to convert those shares of TFN common stock received initially with the Units and those received upon conversion of the preferred stock into shares of VDC common stock, at the conversion rate of one share of TFN common stock for two shares of VDC common stock. Minority interest relating to this transaction was insignificant. In March 2001, an additional two Units, the over allotment Units, were sold from the TFN offering. TFN received net proceeds of approximately $.1 million. 10 12 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 NOTE 4: ACQUISITION OF SPORTSOFT GOLF, INC. In February 2001, the Company completed the acquisition of SportSoft, Golf, Inc. The Company issued 1,686,445 shares of common stock in Visual Data Corporation in exchange for 100% of the common stock of SportSoft Golf, Inc., which was merged into a wholly-owned subsidiary of the Company, Golf Society of the U.S. The value of the common stock issued to shareholders of SportSoft Golf, Inc. was approximately $2.3 million, based upon a share value of $1.375 on December 22, 2000. December 22, 2000 was the date the Company executed the management agreement and began to control the day-to-day operations of SportSoft, Golf, Inc. The estimated fair market value of the tangible assets and the liabilities acquired resulted in a negative net asset base of approximately $2.2 million. Therefore, as a result of the acquisition the Company recorded approximately $4.5 million in intangible assets. The allocation of the intangible assets was approximately $1.7 million to membership lists and approximately $2.8 million to goodwill. The amortization of the membership lists and goodwill is 5 years, on an accelerated basis, and 10 years, straight-line method, respectively. Upon consummation of the management agreement, the Company entered into employment agreements with the two principals of SportSoft Golf, Inc. The employment agreements are for two years and result in a total commitment of approximately $.4 million. The following table sets forth the unaudited pro forma consolidated results of operations for the three and six months ended March 31, 2001 and 2000 giving effect to the acquisition of SportSoft Golf, Inc. as if the acquisition had occurred as of the beginning of the periods presented (in thousands, except per share data):
Six Months Ended Three Months Ended March 31, March 31, --------------------- ------------------ 2001 2000 2001 2000 ------- ------- ------- ------- Revenues $ 4,741 $ 3,779 $ 2,336 $ 2,181 Net Loss (6,846) (7,725) (3,074) (3,734) Net loss per share (.64) (.76) (.30) (.37)
The above unaudited pro forma consolidated results of operations are based upon certain assumptions and estimates which the Company believes are reasonable. The unaudited pro forma consolidated results of operations may not be indicative of the operating results that actually would have been reported had the acquisition been consummated as of the beginning of the periods presented, nor are they necessarily indicative of the results of future operations. NOTE 5: SEGMENT INFORMATION The Company's operations are comprised of five operating groups; Visual Data Travel Group, Visual Data On-Line Broadcast and Production Group, Visual Data Financial Solutions Group, Visual Data Golf, Leisure and Syndication Group and Visual Data Networking Solutions Group. These operating units are managed from the Company's Pompano Beach facility and the facility run by Ednet. The Company's management relies on reports generated by two separate management accounting systems which present various data for management to run the businesses. Management makes financial decisions and allocates resources relating to profit and loss based on the information it receives from these systems. Management makes financial decisions and allocates resources relating to assets and capital expenditures on a consolidated basis. All material balances related to Company sales, primary business activities, and location of property, plant and equipment are within the United States. For the six months ended March 31, 2001 and 2000 the Company provided webcasting services to a single customer, which represented 24% and 15% of total consolidated revenues, respectively. Revenues for such customer totaled approximately $978,000 and $440,000 for the six months ended March 31, 2001 and 2000, respectively. For the three months ended March 31, 2001 and 2000 the Company provided webcasting services to a single customer, which represented 18% and 12% of total consolidated revenues, respectively. Revenues for such customer totaled approximately $429,000 and $197,000 for the three months ended March 31, 2001 and 2000, respectively. The contract with this customer can be terminated upon a 30-day notification. 11 13 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 NOTE 5: SEGMENT INFORMATION (CONTINUED) Detailed below are the results of operations by segment for the six months ended March 31, 2001.
2001 ----------------------------------------------------------------------------------- (in Thousands) Travel On-Line Financial Golf Network Other Total ------- ------- --------- ------- ------- ----- ------- Revenue $ 357 $ 1,143 $ 7 $ 483 $ 1,925 $ 121 $ 4,036 Cost of revenue/allocation 394 567 226 287 1,725 58 3,257 ------- ------- ------- ------- ------- ----- ------- Gross profit (loss) (37) 576 (219) 196 200 63 779 General and administrative 193 44 335 913 670 35 2,190 Sales and marketing 569 171 343 93 455 192 1,823 Corporate allocation 419 419 419 419 313 104 2,093 ------- ------- ------- ------- ------- ----- ------- Total operating costs 1,181 634 1,097 1,425 1,438 331 6,106 ------- ------- ------- ------- ------- ----- ------- Loss from operations (1,218) (58) (1,316) (1,229) (1,238) (268) (5,327) ------- ------- ------- ------- ------- ----- ------- Other income (expense) Interest income -- -- -- 2 1 67 70 Rental and other income -- -- -- -- 1 40 41 Interest expense -- -- -- -- (8) (465) (473) Minority interest -- -- -- -- -- -- -- ------- ------- ------- ------- ------- ----- ------- Total other income (expense) -- -- -- 2 (6) (358) (362) ------- ------- ------- ------- ------- ----- ------- Net loss $(1,218) $ (58) $(1,316) $(1,227) $(1,244) $(626) $(5,689) ======= ======= ======= ======= ======= ===== ======= Depreciation and amortization $ 179 $ 155 $ 118 $ 103 $ 110 $ 161 $ 826 ------- ------- ------- ------- ------- ----- -------
12 14 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 NOTE 5: SEGMENT INFORMATION (CONTINUED) Detailed below are the results of operations by segment for the six months ended March 31, 2000.
2000 ------------------------------------------------------------------------------------------- (in Thousands) Travel On-Line Financial Golf Network Other Total ------- ------- --------- ------- ------- ------- ------- Revenue $ 160 $ 475 $ -- -- 2,260 $133 $ 3,028 Cost of revenue/allocation 475 266 228 -- 2,056 376 3,401 ------- ----- ------- ---- ------- ------- ------- Gross profit (loss) (315) 209 (228) -- 204 (243) (373) General and administrative 216 11 -- -- 697 139 1,063 Sales and marketing 949 120 593 -- 293 686 2,641 Corporate allocation 188 151 743 -- 113 150 1,345 ------- ----- ------- ---- ------- ------- ------- Total operating costs 1,353 282 1,336 -- 1,103 975 5,049 ------- ----- ------- ---- ------- ------- ------- Loss from operations (1,668) (73) (1,564) -- (899) (1,218) (5,422) ------- ----- ------- ---- ------- ------- ------- Other income (expense) Interest income -- -- -- -- 5 322 327 Rental and other income -- -- -- -- (2) 37 35 Interest expense -- -- -- -- (19) (44) (63) Minority interest -- -- -- -- -- 269 269 ------- ----- ------- ---- ------- ------- ------- Total other income (expense) -- -- -- -- (16) 584 568 ------- ----- ------- ---- ------- ------- ------- Net loss $(1,668) $ (73) $(1,564) $ -- $ (915) $ (634) $(4,854) ======= ===== ======= ==== ======= ======= ======= Depreciation and amortization $ 137 $ 79 $ 68 $ -- $ 93 $ 112 $ 489 ------- ----- ------- ---- ------- ------- -------
13 15 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 NOTE 5: SEGMENT INFORMATION (CONTINUED) Detailed below are the results of operations by segment for the three months ended March 31, 2001.
2001 -------------------------------------------------------------------------------------- (in Thousands) Travel On-Line Financial Golf Network Other Total ------- ------- --------- ------- ------- ------- ------- Revenue $ 193 $ 524 $ 1 $ 483 $ 1,106 $ 29 $ 2,336 Cost of revenue/allocation 217 249 112 287 974 4 1,843 ------ ----- ------ ------- ------- ------ ------- Gross profit (loss) (24) 275 (111) 196 132 25 493 General and administrative 81 24 155 914 317 6 1,497 Sales and marketing 217 92 151 93 233 17 803 Corporate allocation 146 191 191 419 178 59 1,184 ------ ----- ------ ------- ------- ------ ------- Total operating costs 444 307 497 1,426 728 82 3,484 ------ ----- ------ ------- ------- ------ ------- Loss from operations (468) (32) (608) (1,230) (596) (57) (2,991) ------ ----- ------ ------- ------- ------ ------- Other income (expense) Interest income -- -- -- 2 -- 24 26 Rental and other income -- -- -- -- 6 19 25 Interest expense -- -- -- -- (4) (130) (134) Minority interest -- -- -- -- -- -- -- ------ ----- ------ ------- ------- ------ ------- Total other income (expense) -- -- -- 2 2 (87) (83) ------ ----- ------ ------- ------- ------ ------- Net loss $ (468) $ (32) $ (608) $(1,228) $ (594) $ (144) $(3,074) ====== ===== ====== ======= ======= ====== ======= Depreciation and amortization $ 93 $ 83 $ 65 $ 103 $ 62 $ 129 $ 535 ------ ----- ------ ------- ------- ------ -------
14 16 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 NOTE 5: SEGMENT INFORMATION (CONTINUED) Detailed below are the results of operations by segment for the three months ended March 31, 2000.
2000 ----------------------------------------------------------------------------------------- (in Thousands) Travel On-Line Financial Golf Network Other Total ------ ------- --------- ------- ------- ------- ------- Revenue $ 93 $ 227 $ -- $ -- $ 1,243 $ 64 $ 1,627 Cost of revenue/allocation 250 135 101 -- 1,114 181 1,781 ------ ----- ------- ----- ------- ------ ------- Gross profit (loss) (157) 92 (101) -- 129 (117) (154) General and administrative 120 7 -- -- 360 65 552 Sales and marketing 366 49 331 -- 178 285 1,209 Corporate allocation 16 12 605 -- 10 111 754 ------ ----- ------- ----- ------- ------ ------- Total operating costs 502 68 936 -- 548 461 2,515 ------ ----- ------- ----- ------- ------ ------- Loss from operations (659) 24 (1,037) -- (419) (578) (2,669) ------ ----- ------- ----- ------- ------ ------- Other income (expense) Interest income -- -- -- -- 2 148 150 Rental and other income -- -- -- -- (2) 17 15 Interest expense -- -- -- -- (9) (22) (31) Minority interest -- -- -- -- -- 154 154 ------ ----- ------- ----- ------- ------ ------- Total other income (expense) -- -- -- -- (9) 297 288 ------ ----- ------- ----- ------- ------ ------- Net loss $ (659) $ 24 $(1,037) $ -- $ (428) $ (281) $(2,381) ====== ===== ======= ===== ======= ====== ======= Depreciation and amortization $ 66 $ 36 $ 30 $ -- $ 48 $ 56 $ 236 ------ ----- ------- ----- ------- ------ -------
For the six months ended March 31, 2001 and 2000 Network recorded revenue from the On-Line and On-Line recorded cost of revenue of $842,000 and $246,000, respectively. For the three months ended March 31, 2001 and 2000 Network recorded revenue from the On-Line and On-Line recorded cost of revenue of $395,000 and $103,000, respectively. Such amounts have been eliminated in the consolidated results of operations. 15 17 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 NOTE 6: STOCK OPTIONS GRANTED TO DIRECTORS AND EMPLOYEES On February 9, 1997, the Board of Directors and a majority of the Company's shareholders adopted the 1996 Stock Option Plan (the "Plan"). Pursuant to amendment to the Plan ratified by shareholders on July 16, 1999, the Company reserved an aggregate of 2,500,000 shares of common stock for issuance pursuant to options granted under the Plan ("Plan Options"). On March 30, 2001, an amendment to the Plan, ratified by the shareholders, reserved an aggregate of 5,000,000 Plan Options. At March 31, 2001 and September 30, 2000 the Company has granted options to management, employees and directors under the Plan. The term of these options are from three to eight years and the vesting periods are from immediate to three years. The Company has granted options to management, employees, directors and consultants that are outside of the Plan. For the three months ended March 31, 2001, the Company granted 702,991 options to consultants at a weighted average fair value of $.56 per share and an exercise price of $2.19 per share. The term of these options are from three to four years and the vesting periods are immediate. At March 31, 2001 the Company had 1,751,120 granted options consultants outstanding. These options have been accounted for under Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation," ("SFAS 123"). The Company has recognized approximately $198,000 in expense for consultant options during the three months ended March 31, 2001. In addition to the 1,135,000 publicly traded warrants issued at the time of the Company's initial public offering, at March 31, 2001, there were vested warrants to purchase an aggregate of 1,424,350 shares of common stock outstanding, inclusive of the Debenture Warrants discussed in Note 2, at exercise prices ranging from $1.84 to $16.50 expiring from July 2002 to December 2005. During the three months ended March 31, 2001 the Company granted 178,530 warrants with a weighted fair value at the date of grant of $1.05 per share and an exercise price of $2.68 per share. All options are granted at a price equal to or greater than the fair market value at the date of grant. Detail of option activity for the six months ended March 31, 2001 is as follows:
March 31, 2001 ------------------------- Weighted Number Average of Exercise Shares Price --------- -------- Balance, beginning of year 4,966,385 $ 5.59 Expired during the period (348,725) 5.13 Granted during the period 1,955,426 2.20 --------- ------- Balance, end of the period 6,573,086 $ 4.60 Exercisable at end of the period 3,963,165 $ 4.77
16 18 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 NOTE 7: LEGAL PROCEEDING On or about October 18, 1999, Peter Bisulca instituted an action against VDC and Randy Selman, the Company's Chief Executive Officer and President, individually, entitled Bisulca v. Visual Data Corporation and Randy S. Selman, Case No. CL 99-9971 AD, in the 15th Judicial Circuit in and for Palm Beach County, Florida. The Complaint alleged breach of contract and conversion against VDC and tortious interference with contract against Randy S. Selman, seeking damages in excess of $2,000,000 in connection with a Consulting Agreement dated May 1, 1998, allegedly entered into between VDC and Peter Bisulca. A Motion to Dismiss was filed on behalf of VDC and Randy S. Selman, the hearing on which was cancelled as a result of the Complaint being amended. The Complaint was amended to no longer include Randy S. Selman as a defendant and the claim for conversion was dropped. The Company intends to vigorously defend itself in this action and, in the opinion of management, the ultimate outcome of this matter will not have a material impact on the Company's financial position or results of operations. NOTE 8: NASDAQ MAINTENANCE STANDARDS Our common stock and warrants are presently quoted on the Nasdaq National Market. Pursuant to NASD Marketplace Rule 4450 in order to maintain our Nasdaq National Market listing we are required to meet certain maintenance standards. One of these standards is that we have net tangible assets of at least $4 million (under current maintenance standards) or total equity of $10 million (under newly proposed maintenance standards). At March 31, 2001, we had net tangible assets of approximately $2.8 million and total equity of approximately $7.9 million, which put us below the existing minimum requirement. As of the date of this report, we have not been advised by the Nasdaq Stock Market of the deficiency. On May 21, 2001 we reached an agreement in principle for an equity financing which will increase our net tangible assets over the minimum maintenance standard requirement. 17 19 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read together with the information contained in the Consolidated Financial Statements and related Notes included in the annual report. Overview General Visual Data Corporation is a full service broadband media company that enables businesses to market their products through various channels including print, television and the Internet. Visual Data's extensive video libraries and media offerings cover a wide range of topics, including travel, golf, leisure activities, medicine and healthcare and business, corporate and financial information. Visual Data is comprised of five operating groups including: Visual Data Network Solutions Group (Ednet) Visual Data On-line Broadcast and Production Group (includes Webcasting, Live audio and video events, etc.) Visual Data Travel Group (includes HotelView, ResortView, etc.) Visual Data Financial Solutions Group (TheFirstNews.com) Visual Data Golf, Leisure and Syndication Group (Golf Society of the U.S.) Plan of Operation Our current plan of operation includes continuing to expand the marketing of our video libraries, the development and marketing of our new on-line products and services, expansion of our golf membership and to continue to look for synergistic acquisition opportunities. During the three months ended March 31, 2001 the Company formed the Golf, Leisure and Syndication Group. The Golf, Leisure and Syndication Group is a golf membership business that markets to the golfing community. The members are provided with the opportunity to acquire equipment, greens fees, trips, and various other benefits at a discounted price. The members are also provided with Player Magazine, a bi-monthly publication for the golfing community. Revenue Recognition Our HotelView, CareView and ResortView libraries recognize production revenue at the time of completion of video production services. Per hit charges are recognized when users watch a video on the Internet. Fixed monthly fees are recognized on a monthly basis consistent with the terms of the contracts. Commissions on ResortView bookings are recognized when the stays are completed. Currently, our Video News Wire and MedicalView divisions recognize revenue when a project is completed and our client is billed. A significant component of our Network Solutions Group's revenue relates to the sale of equipment, which is recognized when the equipment is installed or upon signing of a contract after a free trial period. Our Network Solutions Group recognizes revenues from equipment installation, Webcasting and bridging when service is performed. Network usage revenue is recognized based on customers' monthly usage. Our Network Solutions Group leases some equipment to customers under terms that are accounted for as operating leases. Rental revenue from leases is recognized ratably over the life of the lease and the related equipment is depreciated over its estimated useful life. All leases of the related equipment contain fixed terms. TheFirstNews.com recognizes its subscription revenue 18 20 ratably as service is provided. Our Golf, Leisure and Syndication Group generates revenue from membership fees, advertising, syndication and fees from the sale of equipment. Revenue from the membership fees is recognized ratably over the term of the membership. Advertising revenue is recognized ratably over the two-month publication period. Syndication fees are recognized during the term of the syndication. Revenue from the sale of equipment is recognized when the equipment is shipped. Results of Operations Six months ended March 31, 2001 compared to Six months ended March 31, 2000 Revenue The Company recognized revenue of approximately $4,036,000 during the six months ended March 31, 2001, representing an increase of approximately $1,008,000 (33%) over revenues of approximately $3,028,000 for the same period last year. Revenues from the Network Solutions Group accounted for approximately $1,925,000 during the six months ended March 31, 2001 as compared to approximately $2,260,000 for the same period in fiscal 2000, which represents a decrease of approximately $335,000 (15%). This decrease is the result of a decline in the sale of equipment. Revenues from the On-Line Broadcast and Production Group accounted for approximately $1,143,000 during the six months ended March 31, 2001 as compared to approximately $475,000 for the same period in fiscal 2000, which represents an increase of approximately $668,000 (141%). This increase is primarily the result of the increase in the business services provided which includes webcasts, conference calls and slide show presentations. Revenue from the Travel Group accounted for approximately $357,000 during the six months ended March 31, 2001 as compared to approximately $160,000 for the same period in fiscal 2000, which represents an increase of approximately $197,000 (123%). The increase is the result of production and distribution performed for hotels and resorts. Additionally, revenue from the Golf, Leisure and Syndication Group accounted for approximately $483,000 during the six months ended March 31, 2001. The Golf, Leisure and Syndication Group was formed with the completion of the acquisition of SportSoft Golf, Inc. The financial statements include the results of operations of SportSoft as of January 1, 2001, therefore, there was no revenue for the same period in fiscal 2000. The balance of the Company's revenue for the six months ended March 31, 2001, approximately $128,000, was derived from the Financial Solutions Group and CareView. We sold CareView assets to CuraSpan, Inc. in December 2000. CuraSpan, Inc. entered into a services agreement with CareView to provide the production and distribution of videos. Cost of Revenue Cost of revenue includes video production costs, a percentage of our programmers allocated time, and related overhead costs, costs to publish the magazine, as well as network fees and equipment costs associated with our Network Solutions Group's revenue. In addition, cost of revenue includes the amortization of marketing costs associated with mailings sent to solicit new members. The marketing costs are amortized over the average term of the memberships. Cost of revenue was $3,257,000 during the six months ended March 31, 2001, representing a decrease of approximately $144,000 (4%) from approximately $3,401,000 for the same period last year. Cost of revenues from the Network Solutions Group accounted for approximately $1,725,000 during the six months ended March 31, 2001 as compared to approximately $2,056,000 for the same period in fiscal 2000, which represents a decrease of approximately $331,000 (16%). This decrease is consistent with the decrease in revenues for the Network Solutions Group. Cost of revenues from the On-Line Broadcast and Production Group accounted for approximately $567,000 during the six months ended March 31, 2001 as compared to approximately $266,000 for the same period in fiscal 2000, which represents an increase of approximately $301,000 (113%). This increase is the result of additional direct costs from the business services projects as well as a significant increase in the allocation of programmer's time and related overhead costs. Cost of revenues from the Golf, Leisure and Syndication Group accounted for approximately $287,000 during the six months ended March 31, 2001. The balance of the cost of our revenues during the six months ended March 31, 2001, approximately $678,000, was derived from production and distribution of video content libraries for the Travel Group and Other (CareView), the cost of delivering financial data for the Financial Solutions Group, as well as the allocation of programmer's time and related overhead. The cost of revenue decreased by $400,000 (37%) from $1,079,000 for the Travel Group, Other and the Financial Solutions Group primarily as a result of the change in allocation from the Travel Group and CareView to the On-Line Broadcast and Production Group. 19 21 General and Administrative Expenses General and administrative expenses were $2,190,000 during the six months ended March 31, 2001, representing an increase of approximately $1,127,000 (106%) from approximately $1,063,000 for the same period last year. The increase was primarily the result of the addition of the Golf, Leisure and Syndication Group as well as the capturing of general and administrative expenses in corporate administrative costs for the Financial Solutions Group in the prior year. Sales and Marketing Expenses Sales and marketing expenses was $1,823,000 during the six months ended March 31, 2001, representing a decrease of approximately $818,000 (31%) from approximately $2,641,000 for the same period last year. Sales and marketing expenses from the Travel Group accounted for approximately $569,000 during the six months ended March 31, 2001 as compared to approximately $949,000 for the same period in fiscal 2000, which represents a decrease of approximately $380,000 (40%). The decrease was primarily the result of cost containment and consolidation of marketing and advertising. Sales and marketing expenses from Other, which includes CareView, accounted for approximately $192,000 during the six months March 31, 2001 as compared to approximately $686,000 for the same period in fiscal 2000, which represents a decrease of approximately $640,000 (72%). The decrease was primarily the result of the sale of assets of CareView to CuraSpan, Inc. and the costs savings from fewer employees. Sales and marketing expenses from the Financial Solutions Group accounted for approximately $343,000 during the six months ended March 31, 2001 as compared to approximately $593,000 for the same period in fiscal 2000, which represents a decrease of approximately $250,000 (42%). The decrease was primarily the result of cost containment and consolidation of marketing and advertising. The decrease was off-set by the increase in sales and marketing expenses for the Network Solutions Group and the Golf, Leisure and Syndication Group. Sales and marketing expenses from the Network Solutions Group accounted for approximately $455,000 during the six months ended March 31, 2001 as compared to approximately $293,000 for the same period in fiscal 2000, which represents an increase of approximately $162,000 (55%). Sales and marketing expenses from the Golf, Leisure and Syndication Group accounted for approximately $93,000 during the six months ended March 31, 2001. Corporate Allocation Expenses Corporate allocation expenses were $2,093,000 during the six months ended March 31, 2001, representing an increase of approximately $748,000 (56%) from approximately $1,345,000 for the same period last year. Corporate allocation includes $343,000 non-cash expense for consulting options as a result of the fair value recorded by using the Black-Scholes pricing model as well as $154,000 non-cash expense relating to the amortization of intangible assets associated with the acquisition of SportSoft Golf, Inc. The additional increase is primarily the result of legal and accounting fees, recruiting fees, severance and production services used for corporate development that are classified as general and administrative. Other Income (Expense) Other income (expense) was $(362,000) during the six months ended March 31, 2001, representing an increase in expense of approximately $930,000 (164%) from approximately $568,000 for the same period last year. The increase is primarily the result of $402,000 of interest expense associated with the 6% Convertible Debentures. This interest expense is primarily the result of the debt discount relating to the conversion feature being expensed immediately due to the right of conversion plus the expensing of the fair value of the Warrants, and both are non-cash expenses. In addition, interest income was approximately $70,000 during the six months ended March 31, 2001, representing a decrease of approximately $257,000 (79%) from approximately $327,000 for the same period last year. The decrease in interest income earned is the result of lower cash and cash equivalent balances during the respective periods. For the six months ended March 31, 2001, approximately $269,000 of subsidiary losses were allocated to minority interest. There were no such allocations to minority interest for the six months ended March 31, 2001 as minority interest was reduced to zero as of September 30, 2000. 20 22 Three months ended March 31, 2001 compared to Three months ended March 31, 2000 Revenue The Company recognized revenue of approximately $2,336,000 during the three months ended March 31, 2001, representing an increase of approximately $710,000 (44%) over revenues of approximately $1,627,000 for the same period last year. Revenues from the Network Solutions Group accounted for approximately $1,106,000 during the three months ended March 31, 2001 as compared to approximately $1,243,000 for the same period in fiscal 2000, which represents a decrease of approximately $137,000 (11%). This decrease is the result of a decline in the sale of equipment. Revenues from the On-Line Broadcast and Production Group accounted for approximately $524,000 during the three months ended March 31, 2001 as compared to approximately $227,000 for the same period in fiscal 2000, which represents an increase of approximately $297,000 (131%). This increase is primarily the result of the increase in the business services provided which includes webcasts, conference calls and slide show presentations. Revenue from the Travel Group accounted for approximately $193,000 during the three months ended March 31, 2001 as compared to approximately $93,000 for the same period in fiscal 2000, which represents a increase of approximately $100,000 (108%). The increase is the result of additional production and distribution performed for hotels and resorts. Additionally, revenue from the Golf, Leisure and Syndication Group accounted for approximately $483,000 during the three months ended March 31, 2001. The balance of our revenue for the three months ended March 31, 2001, approximately $30,000, was derived from the Financial Solutions Group and CareView. We sold CareView assets to CuraSpan, Inc. in December 2000. CuraSpan, Inc. entered into a services agreement with CareView to provide the production and distribution of videos. Cost of Revenue Cost of revenue was $1,843,000 during the three months ended March 31, 2001, representing an increase of approximately $62,000 (3%) from approximately $1,781,000 for the same period last year. Cost of revenues from the Network Solutions Group accounted for approximately $974,000 during the three months ended March 31, 2001 as compared to approximately $1,114,000 for the same period in fiscal 2000, which represents a decrease of approximately $140,000 (13%). This decrease is consistent with the decrease in revenues for the Network Solutions Group. Cost of revenues from the On-Line Broadcast and Production Group accounted for approximately $249,000 during the three months ended March 31, 2001 as compared to approximately $135,000 for the same period in fiscal 2000, which represents an increase of approximately $114,000 (84%). This increase is the result of additional direct costs from the business services projects as well as a significant increase in the allocation of programmer's time and related overhead costs. Cost of revenues from the Golf, Leisure and Syndication Group accounted for approximately $287,000 during the three months ended March 31, 2001. The balance of the cost of our revenues during the three months ended March 31, 2001, approximately $333,000, was derived from production and distribution of video content libraries for the Travel Group and Other (CareView), the cost of delivering financial data for the Financial Solutions Group, as well as the allocation of programmer's time and related overhead. The cost of revenue decreased by $198,000 (37%) from $531,000 for the Travel Group, Other and the Financial Solutions Group primarily as a result of the change in allocation from the Travel Group and CareView to the On-Line Broadcast and Production Group. General and Administrative Expenses General and administrative expenses was $1,497,000 during the three months ended March 31, 2001, representing an increase of approximately $945,000 (171%) from approximately $552,000 for the same period last year. The increase was primarily the result of the addition of the Golf, Leisure and Syndication Group as well as the capturing of general and administrative expenses in corporate administrative costs for the Financial Solutions Group in the prior year. Sales and Marketing Expenses Sales and marketing expenses were $803,000 during the three months ended March 31, 2001, representing a decrease of approximately $406,000 (34%) from approximately $1,209,000 for the same period last year. Sales 21 23 and marketing expenses from the Travel Group accounted for approximately $217,000 during the three months ended March 31, 2001 as compared to approximately $366,000 for the same period in fiscal 2000, which represents a decrease of approximately $149,000 (41%). The decrease was primarily the result of cost containment and consolidation of marketing and advertising. Sales and marketing expenses from Other, which includes CareView, accounted for approximately $17,000 during the three months ended March 31, 2001 as compared to approximately $285,000 for the same period in fiscal 2000, which represents a decrease of approximately $268,000 (94%). The decrease was primarily the result of the sale to CuraSpan, Inc. of assets of CareView and the costs reductions from employee reductions. Sales and marketing expenses from the Financial Solutions Group accounted for approximately $151,000 during the three months ended March 31, 2001 as compared to approximately $331,000 for the same period in fiscal 2000, which represents a decrease of approximately $180,000 (54%). The decrease was primarily the result of cost containment and consolidation of marketing and advertising. The decrease was off-set by the increase in sales and marketing expenses for the Network Solutions Group and the Golf, Leisure and Syndication Group. Sales and marketing expenses from the Network Solutions Group accounted for approximately $233,000 during the three months ended March 31, 2001 as compared to approximately $178,000 for the same period in fiscal 2000, which represents an increase of approximately $55,000 (31%). Sales and marketing expenses from the Golf, Leisure and Syndication Group accounted for approximately $93,000 during the three months ended March 31, 2001. Corporate Allocation Expenses Corporate allocation expenses were $1,184,000 during the three months ended March 31, 2001, representing an increase of approximately $430,000 (57%) from approximately $754,000 for the same period last year. Corporate allocation includes $198,000 non-cash expense for consulting options as a result of the fair value recorded by using the Black-Scholes pricing model as well as $154,000 non-cash expense relating to the amortization of intangible assets associated with the acquisition of SportSoft Golf, Inc. The additional increase is primarily the result of legal and accounting fees, severance and production services used for corporate development that are classified as general and administrative. Other Income (Expense) Other Income (expense) was $(87,000) during the three months ended March 31, 2001, representing an increase in expense of approximately $384,000 (129%) from approximately $297,000 for the same period last year. The increase is primarily the result of $92,000 of interest expense associated with the 6% Convertible Debentures. Interest income was approximately $26,000 during the three months ended March 31, 2001, representing a decrease of approximately $124,000 (83%) from approximately $150,000 for the same period last year. The decrease in interest income earned is the result of lower cash and cash equivalent balances during the respective periods. For the three months ended March 31, 2000, approximately $154,000 of subsidiary losses were allocated to minority interest. There were no such allocations to minority interest for the three months ended March 31, 2001 as minority interest was reduced to zero as of September 30, 2000. Liquidity and Capital Resources The Company's working capital at March 31, 200 was $879,000, an decrease of approximately $2,691,000 from September 30, 2000. The change in working capital was primarily attributable to cash used in operating activities of $5,325,000 for the six months ended March 31, 2001 which was partially off-set by the proceeds from the sale of preferred stock in TheFirstNews.com ($905,000, net), the sale of the 6% Convertible Debentures ($1,840,000, net) and the sale of Visual Data Corporation common stock ($1,000,000, net). Net cash used in investing activities was $960,000 for the six months ended March 31, 2001. Net cash provided by financing activities, as previously described, for the six months ended March 31, 2001 was $3,734,000. As previously disclosed, in February 2001 we completed the acquisition of SportSoft Golf, Inc. and thereafter formed our Golf, Leisure and Syndication Group. Our balance sheet at March 31, 2001 reflects the changes in our financial statements as a result of this acquisition. At March 31, 2001 our prepaid expenses increased approximately $1,163,000, or approximately 272%, from September 30, 2000. Included in prepaid expenses 22 24 at March 31, 2001 is approximately 465,000 which is attributable to the Golf, Leisure and Syndication Group. In addition, prepaid expenses have increased by approximately $523,000 which is attributable to the granting of options and warrants to consultants which are accounted for in accordance with SFAS 123. At March 31, 2001 we also reported deferred marketing costs of approximately $646,000, which represented marketing costs associated with mailings sent to solicit new members, and other current assets of approximately $214,000, which represented primarily the investment and loan to CuraSpan, Inc. At September 30, 2000 we did not have comparable assets. The increase of approximately $4,545,000 in our intangible assets at March 31, 2001 from September 30, 2000 is attributable to goodwill and membership lists associated with our acquisition of SportSoft Golf, Inc. At March 31, 2001 the increase in our total current liabilities from September 30, 2000 is primarily attributable to approximately $1,422,000 of accrued membership liability which represents the estimated future costs that we will incur to fulfill the magazine for memberships that were paid to SportSoft Golf, Inc. prior to our acquisition of the company and an increase of approximately $364,000 in deferred revenue which is primarily attributable to the Golf, Leisure and Syndication Group cash receipts from memberships since our acquisition of SportSoft Golf, Inc., for which, we have not recognized the revenue at March 31, 2001. For the six months ended March 31, 2001, we had an operating loss of approximately $5.7 million and cash used in operations of approximately $5.3 million. Our forecast for fiscal year 2001 anticipates a reduction in cash used in operations from the usage during fiscal year 2000. At March 31, 2001, we had $1.2 million of cash and cash equivalents and restricted cash available to fund future operations. In December 2000, we sold $2,040,000 principal amount of 6% Convertible Debentures to two entities in a private transaction exempt from registration under the Securities Act of 1933 in reliance on Section 4(2) of such act. See Note 2 to the Notes to Unaudited Condensed Consolidated Financial Statements. In January 2001, we sold 800,000 shares of Common Stock to a non-affiliated third party in a private transaction exempt from registration under the Securities Act of 1933 in reliance on Section 4(2) of such act. The Company is constantly evaluating its cash needs and existing burn rate. In the evaluation of its cash needs, the Company will continue to raise additional capital through the sale of equity and debt securities, as deemed necessary. In addition, the Company has a plan whereby certain non-essential personnel and administrative costs may be reduced so that we may continue to meet its operating and financing obligations as they come due. No assurances can be given that the Company will be successful in obtaining additional capital, or that such capital will be available on terms acceptable to it. Further, there can be no assurance that even if such additional capital is obtained or the planned cost reductions are implemented, that the Company will achieve profitability or positive cash flow. 23 25 PART II - OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders. Our annual shareholders' meeting was held on March 30, 2001. At the annual meeting our shareholders were asked to consider and vote upon the following matters: (1) The election of six members of our Board of Directors to serve until our 2002 annual meeting of shareholders or until their successors are duly elected and qualified; (2) The ratification of the appointment of Arthur Andersen LLP as our independent auditors for the fiscal year ending September 30, 2001; (3) The approval of the issuance of in excess of 19.99% of Visual Data's common stock; and (4) The approval of the amendment to the 1996 Stock Option Plan increasing the shares to 5,000,000. The following six members of our Board of Directors were duly elected:
Director Votes For Votes Against Votes Abstained -------- --------- ------------- --------------- Randy S. Selman 9,075,763 16,050 101,197 Alan M. Saperstein 9,090,563 1,250 101,197 Benjamin Swirsky 9,090,363 1,450 101,197 Brian K. Service 9,090,613 1,200 101,197 Eric Jacobs 9,086,149 5,664 101,197 Robert J. Wussler 9,090,563 1,250 101,197
The results of the vote on the ratification of the appointment of Arthur Andersen LLP as auditors of our financial statements for the fiscal year ending September 30, 2001, are as follows:
Votes For Votes Against Abstentions --------- ------------- ----------- 9,083,882 100,001 9,127
The approval of the issuance of in excess of 19.99% of Visual Data's common stock are as follows:
Votes For Votes Against Abstentions --------- ------------- ----------- 3,236,353 251,153 30,000
The approval of an amendment to the 1996 Stock Option Plan increasing the shares to 5,000,000 24 26
Votes For Votes Against Abstentions --------- ------------- ----------- 3,028,667 460,954 27,885
Item 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K. Reports on Form 8-K On January 3, 2001 we filed a Report on Form 8-K with the Securities and Exchange Commission disclosing, under Item 2., the Management Agreement and Merger Agreement with SportSoft Golf, Inc. On February 27, 2001 we filed a Report on Form 8-K with the Securities and Exchange Commission disclosing, under Item 2., the acquisition of SportSoft Golf, Inc. On March 9, 2001 we filed a Report on Form 8-K/A with the Securities and Exchange Commission disclosing, under Item 7., the Pro Forma financial statements of SportSoft Golf, Inc. On May 3, 2001 we filed a Report on Form 8-K/A with the Securities and Exchange Commission disclosing, under Item 7., the Pro Forma financial statements of SportSoft Golf, Inc. 25 27 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: May 22, 2001 /s/ Randy S. Selman -------------------------- Randy S. Selman, President and Chief Executive Officer /s/ Gail L. Babitt - --------------------------------- Chief Financial Officer and Principal Accounting Officer 26 -----END PRIVACY-ENHANCED MESSAGE-----