-----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, UHggpwkkbxAfNKtpdGHAvBCH+7fKA7FnDHF7S3o7quE49WbwKGztJ9h7JXfo4T7w eptxTZ287WUO4pu2og4KJw== 0000950144-02-005630.txt : 20020515 0000950144-02-005630.hdr.sgml : 20020515 20020515161640 ACCESSION NUMBER: 0000950144-02-005630 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 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: 1934 Act SEC FILE NUMBER: 000-22849 FILM NUMBER: 02652564 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 g76388e10qsb.txt VISUAL DATA CORPORATION 10-Q 03/31/02 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, 2002 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, 2002 the registrant had issued and outstanding 27,017,708 shares of common stock. Transitional Small Business Disclosure Format (check one); Yes [ ] No [X] PART I - FINANCIAL INFORMATION Item 1. Financial Statements. INDEX TO FINANCIAL STATEMENTS Page Number ----------- Table of Contents 2 Condensed Consolidated Balance Sheets at March 31, 2002 (Unaudited) and September 30, 2001 3 Condensed Unaudited Consolidated Statements of Operations for the Six and Three Months Ended March 31, 2002 and 2001 4-5 Condensed Unaudited Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2002 and 2001 6-7 Notes to Unaudited Consolidated Financial Statements 8-17 2 VISUAL DATA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, September 30, 2002 2001 ------------ ------------- (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 110,421 $ 52,161 Restricted cash -- 182,189 Accounts receivable, net of allowance for doubtful accounts of $420,204 and $218,240, respectively 1,799,166 1,226,586 Prepaid expenses 765,285 423,417 Inventories, net of allowance for inventory obsolescence of $183,000 and $242,000, respectively 494,192 538,087 Other current assets 108,837 59,450 ------------ ------------ Total current assets 3,277,901 2,481,890 PROPERTY AND EQUIPMENT, net 4,368,085 3,651,631 INTANGIBLE ASSETS, net 5,750,536 2,799,929 OTHER NON-CURRENT ASSETS 356,061 117,341 NET ASSETS OF DISCONTINUED OPERATIONS -- 3,808,442 ------------ ------------ Total assets $ 13,752,583 $ 12,859,233 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 2,756,689 $ 1,676,483 Deferred revenue 186,834 232,045 Current portion of obligations under capital leases 347,184 16,643 Current portion of mortgage note payable 828,025 850,923 Notes payable 2,076,951 325,000 ------------ ------------ Total current liabilities 6,195,683 3,101,094 CAPITAL LEASE OBLIGATIONS, net of current portion 187,397 27,928 DEBT 1,243,814 2,343,402 COMMITMENTS AND CONTINGENCIES (Note 8) STOCKHOLDERS' EQUITY: Preferred stock, par value $0.0001 per share; authorized 5,000,000 shares, 300,000 issued and outstanding 30 -- Common stock, par value $0.0001 per share; authorized 75,000,000 shares, 25,884,375 and 15,165,389 issued and outstanding 2,588 1,516 Additional paid-in-capital 53,207,693 47,108,622 Accumulated deficit (47,084,622) (39,723,329) ------------ ------------ Total stockholders' equity 6,125,689 7,386,809 ------------ ------------ Total liabilities and stockholders' equity $ 13,752,583 $ 12,859,233 ============ ============
The companying notes to unaudited condensed consolidated financial statements are an integral part of these condensed consolidated balance sheets. 3 VISUAL DATA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Six Months Ended March 31, Three Months Ended March 31, --------------------------------- --------------------------------- 2002 2001 2002 2001 ----------- ----------- ----------- ----------- Webcasting and related equipment sales $ 1,923,986 $ 1,042,995 $ 1,390,891 $ 495,794 Network equipment sales and rentals 508,262 635,331 309,826 449,879 Network usage 1,289,308 1,238,008 600,401 602,188 Travel production and distribution 306,010 356,807 166,471 192,632 Other 9,229 273,190 9,229 111,772 ----------- ----------- ---------- ----------- TOTAL REVENUE 4,036,795 3,546,331 2,476,818 1,852,265 OPERATING EXPENSES: Webcasting and related equipment costs 649,299 535,922 521,017 190,324 Network equipment sales and rentals 253,370 400,274 165,042 291,451 Network usage 789,678 714,780 385,100 336,406 Travel production and distribution 58,531 66,308 32,730 46,537 Other costs -- 65,313 -- 12,689 General and administrative: Compensation 2,471,932 2,542,093 1,320,994 1,154,030 Professional fees 736,134 962,714 437,995 549,022 Other 709,073 989,033 363,785 446,296 Sales and marketing 101,804 282,558 44,815 63,279 Depreciation and amortization 892,482 614,031 603,259 303,953 ----------- ----------- ----------- ----------- Total operating costs 6,662,303 7,173,026 3,874,737 3,393,987 ----------- ----------- ----------- ----------- Loss from operations (2,625,508) (3,626,695) (1,397,919) (1,541,722) OTHER INCOME (EXPENSE): Interest income 2,693 67,720 1,640 23,343 Loss on debenture (3,573,103) -- (3,573,103) -- Interest expense (408,827) (472,976) (291,457) (134,184) Other income 6,428 243,468 69,036 20,279 ----------- ----------- ----------- ----------- Total other expense, net (3,972,809) (161,788) (3,793,884) (90,562) ----------- ----------- ----------- ----------- Net loss from continuing operations (6,598,317) (3,788,483) (5,191,803) (1,632,284)
(Continued) 4 VISUAL DATA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued, Unaudited)
Six Months Ended March 31, Three Months Ended March 31, --------------------------------- --------------------------------- 2002 2001 2002 2001 ----------- ----------- ----------- ----------- DISCONTINUED OPERATIONS: Loss from golf, leisure and syndication group (588,760) (965,954) -- (965,954) Loss from financial solutions group (174,216) (934,859) (1,674) (475,584) ----------- ----------- ----------- ----------- Loss from discontinued operations (762,976) (1,900,813) (1,674) (1,441,538) ----------- ----------- ----------- ----------- NET LOSS $(7,361,293) $(5,689,296) $(5,193,477) $(3,073,822) =========== =========== =========== =========== Loss per share - basic and diluted Continuing operations $ (.34) $ (.41) $ (.23) $ (.16) Discontinued operations (.04) (.20) -- (.14) ----------- ----------- ----------- ----------- Net loss per share $ (.38) $ (.61) $ (.23) $ (.30) =========== =========== =========== =========== Weighted average shares of common stock outstanding 19,242,472 9,356,982 22,303,986 10,280,686 =========== =========== =========== ===========
The companying notes to unaudited condensed consolidated financial statements are an integral part of these condensed consolidated balance sheets. 5 VISUAL DATA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31, (Unaudited)
2002 2001 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $(7,361,293) $(5,689,296) Depreciation and amortization 892,482 614,031 (Reduction) provision for doubtful accounts 46,842 (41,337) Reduction in allowance for inventory obsolescence (59,000) -- Loss from discontinued operations 762,976 1,900,813 Loss from writeoff of GSI debenture 3,573,103 -- Interest expense on convertible debentures and other 273,384 402,243 Amortization of deferred services and incentives 593,421 343,322 Change in assets and liabilities: (Increase) decrease in accounts receivable (201,434) 90,798 Increase in prepaid expenses 38,260 (3,757) Increase in other current assets (49,387) (187,463) Decrease in inventories 102,895 55,497 Decrease in accounts payable and accrued expenses (533,452) (292,232) Decrease in deferred revenue (114,433) (156,927) ----------- ----------- NET CASH USED IN OPERATING ACTIVITIES (2,035,636) (2,964,308) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of property and equipment (15,532) (210,259) Decrease (increase) in restricted cash 182,189 (9,566) Acquisition of subsidiary MOD 79,875 -- Investment in subsidiary EDNET -- 25,775 Acquisition of subsidiary GSUS, net of cash -- 7,632 Decrease in other non-current assets 25,933 232,221 ----------- ----------- NET CASH PROVIDED BY INVESTING ACTIVITIES 272,465 45,803 ----------- -----------
(Continued) 6 VISUAL DATA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, (Continued, unaudited)
2002 2001 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on mortgage note payable (22,898) (21,610) Payments on capital leases (119,044) (15,351) Proceeds from issuance of common stock 450,000 1,000,000 Proceeds from notes payable 2,000,000 -- Proceeds from issuance of preferred stock 261,000 -- Proceeds from exercise of warrants and options 325,010 -- Proceeds from sale of convertible debentures -- 1,840,000 Redemption of convertible debentures (345,000) -- Repayment of note payable (200,000) -- Proceeds from sale of preferred stock of subsidiary -- 905,430 ----------- ----------- NET CASH PROVIDED FROM FINANCING ACTIVITIES 2,349,068 3,708,469 ----------- ----------- CASH USED IN DISCONTINUED OPERATIONS: Operating activities (527,637) (3,420,467) ----------- ----------- NET CASH USED IN DISCONTINUED OPERATIONS (527,637) (3,420,467) ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 58,260 (2,630,503) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 52,161 3,457,784 ----------- ----------- CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 110,421 $ 827,281 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for interest $ 91,676 $ 42,764 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Conversion of debentures $ 858,170 $ -- Issuance of warrants and options for deferred services and incentives 307,474 53,885 Investment in Onstream Media by issuing common stock 200,000 -- Issuance of common stock for interest on note 584,618 -- Issuance of common stock for content 222,000 -- Issuance of common stock for MOD acquisition 2,279,855 -- Issuance of common stock for payment of accounts payable 165,795 --
The companying notes to unaudited condensed consolidated financial statements are an integral part of these condensed consolidated balance sheets. 7 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2002 NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Nature of Business Visual Data Corporation (The "Company" or "VDAT"), organized in 1993, is a full service broadband media company that specializes in webcasting, networking solutions for the entertainment industry and marketing solutions for the travel industry. VDAT is comprised of three operating groups including: Visual Data Webcasting Group, Visual Data Networking Solutions Group (EDNET) and Visual Data Travel Group (includes HotelView and ResortView). The Visual Data Webcasting Group provides an array of corporate-oriented web-based media services to the corporate market including live audio and video webcasting, packaged corporate announcements, and information distribution (Internet, broadcast TV and radio) for any business entity, and can provide point-to-point audio and video transport worldwide. The Webcasting Group generates revenues through production and distribution fees. Visual Data's Networking Solutions Group, which is comprised of our EDNET subsidiary, provides connectivity within the entertainment and advertising industries through its private network, which encompasses production and post-production companies, advertisers, producers, directors, and talent. The network enables high-speed exchange of high quality audio, compressed video and multimedia data communications, utilizing long distance carriers, regional phone companies, satellite operators, and major Internet Service Providers. The Networking Solutions Group also provides systems integration and engineering services, application-specific technical advice, web-casting services, audio equipment, proprietary and off-the-shelf codecs, teleconferencing equipment, and other innovative products to facilitate the Company's broadcast and production applications. The Networking Solutions Group manages a global network of over 500 North American affiliates, and nearly 200 international associates, in cities throughout the United States, Canada, Mexico, Europe, and the Pacific Rim. The Network Solutions Group generates revenues from the sale, rental and installation of equipment, network usage, distribution fees and other related fees. The Visual Data Travel Group produces Internet-based multi-media streaming videos such as hotel, resort, golf facility, travel destination and time-share productions designed to keep a high level of viewer interest. These concise, broadband-enabled "vignettes" generally have running times from 2-4 minutes. In addition to the high-end vignettes, the Company offers a commercial on the web ("COW"), which consists of a 2 minute narrated photo presentation of corporate properties. The Visual Data Travel Group generates revenues from production and distribution fees. The Company owns or co-owns virtually all the content created, which provides content for syndication. During the fiscal year ended September 30, 2001 the Company had two additional operating groups, the Visual Data Financial Solutions Group and the Visual Data Golf, Leisure and Syndication Group. The Visual Data Financial Solutions Group was established in November 1999 to address the information needs of the financial sector. The Golf, Leisure and Syndication Group was formed in December 2000 with the acquisition of the Golf Society of the U.S. which is a membership business that markets to the golfing community. Its members are provided with the opportunity to acquire equipment, greens fees, trips and various other benefits at a discounted price. In December 2001 the Company decided to discontinue the operations of both the Financial Solutions Group and the Golf, Leisure and Syndication Group as a result of their adverse impact on the Company's financial condition and in keeping with our overall strategic plan. 8 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2002 NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis of Consolidation The accompanying consolidated financial statements include the accounts of Visual Data Corporation and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. 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. Earnings Per Share For the periods ended March 31, 2002 and 2001, 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, were 15,761,833 and 10,883,556 at March 31, 2002 and 2001, respectively. Effects of Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The accounting for changes in the fair value of a derivative (that is, gains and losses) depends upon the intended use of the derivative and resulting designation. In July 1999, FASB issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of SFAS No. 133, which postponed the effective date of SFAS No. 133 for one year. In June 2000, FASB issued SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment to SFAS No. 133. The Company adopted SFAS No. 133 (as amended by SFAS No. 138) as of October 1, 2000. The adoption of this statement had no impact on the Company's financial position or results of operations. 9 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2002 NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) Effects of Recent Accounting Pronouncements (continued) In July 2001, the FASB issued SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. Under SFAS 142, goodwill and intangible assets with indefinite lives are no longer amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment, and accordingly, no goodwill was amortized for the period ended December 31, 2001. Separable intangible assets that are not deemed to have indefinite lives will continue to be amortized over their useful lives (but with no maximum life). The amortization provisions of SFAS 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, the Company has adopted SFAS 142 effective October 1, 2001. The adoption of SFAS 142 required the Company to complete a review of its goodwill for impairment no later than March 31, 2002. The Company performed this review within the prescribed deadline. Based upon the analysis performed by the Company, management believes no impairment exists as of March 31, 2002. For the six and three months ended March 31, 2001, $36,890 and $18,445 of goodwill was amortized. The pro forma net loss for the six and three months ended March 31, 2001 was $5,652,406 and $3,055,378. In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which replaces SFAS No. 121. The accounting model for long-lived assets to be disposed of by sale applies to all long-lived assets, including discontinued operations, and replaces the provisions of APB Opinion No. 30, Reporting Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of segments of a business. SFAS No. 144 requires that those long-lived assets be measured at the lower of the carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. Therefore, discontinued operations will no longer be measured at net realizable value or include amounts for operating losses that have not yet occurred. SFAS No. 144 also broadens the reporting of discontinued operations to include all components of an entity with operations that can be distinguished from the rest of the entity and that will be eliminated from the ongoing operations of the entity in a disposal transaction. The provisions of SFAS No. 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001 and, generally, are to be applied prospectively. The Company has not yet evaluated the impact that adoption of SFAS No. 144 will have on its financial statements. 10 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2002 NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) 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, 2001 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 VDAT and subsidiaries as of March 31, 2002 and the results of their operations and cash flows for the six months and three months ended March 31, 2002 and 2001. 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, 2002. NOTE 2: DEBT On December 4, 2001 we entered into a private debt financing transaction with a shareholder pursuant to the terms and conditions of a Loan Agreement, a Secured Promissory Note in the principal amount of $3 million and a Security Agreement. Under the terms of the debt financing transaction, the lender advanced us $1.5 million at closing. The loan bears interest at approximately 12%, which was prepaid in January 2002 with the issuance of 500,000 shares of common stock. In February 2002 we drew down on the line of credit and prepaid the interest on the line of credit with the issuance of 500,000 additional shares of common stock. The balance on the line of credit at March 31, 2002 is $2 million. Since April 2002 we are required to make principal payments on the loan of $125,000 per month, until such time as we have repaid $1 million of the loan, and thereafter our monthly payments shall be fixed at $100,000. At such time as we receive equity or strategic financing in excess of $1.5 million (other than certain excluded transactions), 30% of the net proceeds of such funds will be used by us to reduce the principal owed under the Secured Promissory Note. If we receive $5 million in an equity or strategic financing transaction (other than certain excluded transactions), then the entire remaining principal amount of the Secured Promissory Note is to be repaid by us. We granted the lenders a security interest in all of our tangible and intangible assets, and issued him a warrant to purchase 1 million shares of our common stock at an exercise price of $1.00 per share. We agreed to file a registration statement with the SEC to register the resale of the shares issuable upon the exercise of this warrant, as well as the shares issued as interest under the Secured Promissory Note, within six months from the date of the transaction and we granted the lender certain piggy-back registration rights. 11 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2002 NOTE 2: DEBT (Continued) In conjunction with the transaction, all members of our management have each agreed to limit their annual compensation under certain circumstances while the loan is outstanding. In addition, the Chief Executive Officer and Executive Vice President each agreed to cancel 750,000 options held by them to purchase shares of our common stock. On March 11, 2002, the Company redeemed $345,000 of the outstanding principal of the convertible debentures held by Halifax Fund LP ("Halifax") and Palladin Opportunity Fund LLC ("Palladin"). In addition, Halifax and Palladin each converted $200,000 of the outstanding principal into shares of common stock at $.513 per share, in accordance with the conversion calculation from the 6% convertible debentures. The Company is permitted to redeem the remaining $1,179,000 of outstanding principal at 115% par value in six equal quarterly installments beginning on July 1, 2002. At such time as we receive equity or strategic financing in excess of $1 million (other than certain excluded transactions), 35% of the net proceeds of such funds will be used by us to reduce the principal owed under the note. If we receive $2 million in an equity or strategic financing transaction (other than certain excluded transactions), then 50% of the net proceeds of such funds will be used by us to reduce the principal owed under the note. We granted Halifax and Palladin a security interest in all of our tangible and intangible assets in second position to the Secured Promissory Note. NOTE 3: SEGMENT INFORMATION The Company's operations are currently comprised of three operating groups; Visual Data Webcasting Group, Visual Data Networking Solutions Group and Visual Data Travel Group. These operating units are managed from the Company's Pompano Beach facility, the San Francisco facility run by EDNET and the New York facility run by MOD. All material balances related to Company sales, primary business activities, and location of property and equipment are within the United States. For the six months ended March 31, 2002 and 2001, the Company provided webcasting services to a single customer, which represented 20% and 28% of total consolidated revenues, respectively. Revenues for such customer totaled approximately $826,000 and $978,000 for the six months ended March 31, 2002 and 2001, respectively. For the three months ended March 31, 2002 and 2001, revenues were $371,000 and $429,000 from this single customer representing 15% and 23% of total revenues, respectively. The contract with this customer can be terminated upon a 30-day notification. 12 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2002 NOTE 3: SEGMENT INFORMATION (continued) Detailed below are the results of operations by segment for the six and three months ended March 31, 2002 and 2001.
For the six months ended For the three months ended --------------------------------- --------------------------------- 03/31/02 03/31/01 03/31/02 03/31/01 ----------- ----------- ----------- ----------- Revenues: Webcasting Group $ 1,923,986 $ 1,042,995 $ 1,390,891 $ 495,794 Networking Solutions Group 1,797,570 1,873,339 910,227 1,052,067 Travel Group 306,010 356,807 166,471 192,632 Other 9,229 273,190 9,229 111,772 ----------- ----------- ----------- ----------- Total consolidated revenues 4,036,795 3,546,331 2,476,818 1,852,265 Segment operating income (loss): Webcasting Group 344,618 288,568 123,145 186,492 Networking Solutions Group (231,565) (670,142) (101,330) (269,641) Travel Group (269,654) (471,526) (114,058) (151,577) Other 9,229 48,740 9,229 85,605 ----------- ----------- ----------- ----------- Total (147,372) (804,360) (83,014) (149,121) Corporate and unallocated shared expenses 2,478,136 2,822,335 1,314,905 1,392,600 Other expense (3,972,809) (161,788) (3,793,884) (90,563) ----------- ----------- ----------- ----------- Loss before discontinued operations (6,598,317) (3,788,483) (5,191,803) (1,632,284) Loss from discontinued operations (762,976) (1,900,813) (1,674) (1,441,538) ----------- ----------- ----------- ----------- Net loss $(7,361,293) $(5,689,296) $(5,193,477) $(3,073,822) =========== =========== =========== ===========
03/31/02 09/30/01 ----------- ----------- Total assets: Webcasting Group $ 5,309,203 $ 1,808,110 Networking Solutions Group 4,548,992 4,605,782 Travel Group 823,151 831,534 Other 3,071,237 5,613,807 ----------- ----------- Total $13,752,583 $12,859,233 =========== ===========
13 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2002 NOTE 4: 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 an 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. On April 11, 2002, an amendment to the Plan, ratified by the shareholders, reserved an aggregate of 10,000,000 Plan Options and 1,000,000 shares. At March 31, 2002 and 2001 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 four years. As of March 31, 2002, The Company has granted an aggregate of 159,224 shares of common stock to employees, directors and officers as compensation. 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, 2002 is as follows: Weighted Average Number Exercise of Shares Price ----------- -------- Balance, beginning of period 10,494,855 $ 3.57 Expired (2,593,236) 7.09 Exercised (64,460) -- Granted 1,434,250 1.02 ----------- -------- Balance, end of period 9,271,409 $ 2.21 =========== ======== Exercisable at end of period 5,689,692 $ 2.61 =========== ======== The Company has granted options to consultants that are outside of the Plan. For the three months ended March 31, 2002, the Company granted 30,000 options to consultants at a weighted average fair value of $.20 per share and an exercise price of $1.00 per share. The term of these options are three years and the vesting periods are immediate. At March 31, 2002 the Company had 2,083,991 granted options to 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 $405,000 and $235,000 in expense for consultant options during the six and three months ended March 31, 2002, respectively. In addition to the 1,135,000 publicly traded warrants issued at the time of the Company's initial public offering, at March 31, 2002, there were vested warrants to purchase an aggregate of 3,271,433 shares of common stock outstanding, at exercise prices ranging from $.70 to $16.50 expiring from July 2002 to May 2006. During the three months ended March 31, 2002 the Company granted 575,000 warrants with a weighted fair value at the date of grant of $.13 per share and an exercise price of $1.55 per share. 14 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2002 NOTE 5: ACQUISITION OF MEDIA ON DEMAND.COM On February 7, 2002, MediaOnDemand.com, Inc. ("MOD") was merged with and into VDAT/MOD Acquisition Corp., a Florida corporation and a wholly owned subsidiary of Visual Data Corporation. VDAT controlled MOD as of January 1, 2002 and had made advances of $157,000 to MOD as of that date. The results of MOD are included in these financial statements as if the transaction had occurred on January 1, 2002. All outstanding shares of MOD capital stock and converted options have been converted into an aggregate of 3,400,000 shares of VDAT restricted common stock. The value of the common stock issued was approximately $2.1 million, based on a share value of $0.63 on February 7, 2002. The estimated fair market value of the tangible assets and the liabilities acquired resulted in a negative net asset base of approximately $.9 million. Therefore, as a result of the acquisition, approximately $3.0 million of the purchase price was allocated to customer lists. This intangible asset is being amortized over a five year period. The following table sets forth the unaudited pro forma consolidated results of operations for the six and three months ended March 31, 2002 and 2001 giving effect to the acquisition of MOD, 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, ------------------------- ------------------------- 2002 2001 2002 2001 ------- ------- ------- ------- Revenues $ 4,789 $ 6,530 $ 2,477 $ 3,028 Net Loss (8,398) (9,547) (5,193) (4,712) Net Loss per Share $ (0.44) $ (0.75) $ (0.23) $ (0.34)
NOTE 6: DISCONTINUED OPERATIONS In February 2001, the Company completed the acquisition of SportsSoft 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 SportsSoft 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 SportsSoft Golf, Inc. was approximately $2.3 million, based upon a share value of $1.375 on December 22, 2000. 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 $5.0 million in intangible assets. In December of 2001, management adopted a plan to sell the Company's Golf, Leisure and Syndication Group segment and cease operations of the Financial Solutions Group segment in order to focus on certain core businesses. Accordingly, the operating results of these segments have been segregated from continuing operations and reported as a separate line item on the statement of operations. 15 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2002 NOTE 6: DISCONTINUED OPERATIONS (Continued) On January 10, 2002, the Company executed a Stock Purchase Agreement for the sale of the Golf Society of the U.S. for a $6.5 million 6% Convertible Debenture (the "Debenture"). The Debenture is convertible into common stock of Golf Society International, Inc., an unaffiliated third party. The Debenture is for five years and limits the beneficial ownership of the Company to 19.9%, with the exception of a simultaneous conversion and private or public sale of the investment. See Note 8 for a further discussion of this transaction. A summary of the net assets of discontinued operations for the Company's Golf, Leisure and Syndication Group is as follows: 3/31/02 09/30/01 ------- ---------- Current assets $ -- $1,914,118 Non-current assets -- 5,001,473 ------ ---------- Total assets -- 6,915,591 ------ ---------- Current liabilities -- 3,107,149 Non-current liabilities -- -- ------ ---------- Total liabilities -- 3,107,149 ------ ---------- Net assets of discontinued operations $ -- $3,808,442 ====== ========== The following table sets forth a summary of the results of operations of the Company's Financial Solutions Group ("TFN") and the Golf, Leisure and Syndication Group ("GSUS") for the six months and three months ended March 31:
Six months ended Three months ended ----------------------------- ---------------------------- 2002 2001 2002 2001 --------- --------- ------- --------- TFN: Revenue $ 15 $ 6,910 $ -- $ 765 Operating loss (174,216) (934,859) (1,674) (475,584) Net loss (174,216) (934,859) (1,674) (475,584) GSUS: Revenue $ 516,790 $ 482,845 $ -- $ 482,845 Operating loss (588,760) (965,954) -- (965,954) Net loss (588,760) (965,954) -- (965,954)
NOTE 7: EQUITY The Company sold shares of common stock under subscription agreements to institutional investors. In March 2002 the Company sold 1,030,400 shares of common stock for net proceeds of approximately $450,000. In April 2002, the 300,000 shares of preferred stock were converted into 600,000 shares of common stock. 16 VISUAL DATA CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2002 NOTE 8: SUBSEQUENT EVENTS In January 2002 The Company sold the stock of Golf Society of the U.S. to Golf Society International, Inc. ("GSI") for the Debenture. During April 2002, GSI defaulted on a loan from the Company. In addition, the Company became aware of GSI's neglect of several vendor payments, employee payments and tax payments. As a result of the actions taken by the President and CEO of GSI, the Company has filed a lawsuit against GSI seeking damages in excess of $6.5 million. As a result of the alleged financial condition of GSI, the Company has fully reserved the Debenture as of March 31, 2002. Therefore, the Company has recorded an additional expense of approximately $3.6 million during the six months and three months ended March 31, 2002. On February 14, 2002, the Company received a letter from Nasdaq giving the Company 90 days (the first grace period) to comply with the $1.00 minimum bid price required to maintain listing on the Nasdaq National Market. The letter informed the Company that an application can be filed to transfer the Company to the SmallCap Market within the grace period. If the Company files a transfer application and pays the necessary fees, pending Staff's review of the transfer application, the Company can be transferred to the SmallCap Market. If the transfer application is approved, the Company will be afforded the 180 calendar day SmallCap Market grace period (the second grace period) from the date of the letter. The Company may also be eligible for an additional 180 calendar day grace period (the third grace period) provided it meets the initial listing criteria for the SmallCap Market. In addition, the Company may be eligible to transfer back to the Nasdaq National Market, without any additional fees, if by February 10, 2003 the Company maintains a bid price per share of $1.00 for 30 consecutive trading days and it has maintained all other continued listing requirements. On May 9, 2002, the Company filed for a transfer to the SmallCap Market. We currently comply with all other continued listing requirements of the SmallCap Market, and, therefore, expect that our transfer application will be approved. 17 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 We are a full service broadband media company that specializes in webcasting, networking solutions for the entertainment industry and marketing solutions for the travel industry. Our operations are comprised of three operating groups, including: * Visual Data Webcasting Group * Visual Data Networking Solutions Group * Visual Data Travel Group REVENUE RECOGNITION Our Webcasting Group recognizes revenue when a project is completed. A significant component of our Networking 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 Networking Solutions Group recognizes revenues from equipment installation and bridging when service is performed. Networking usage revenue is recognized based on customers' monthly usage. Our Networking 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. Our Travel Group 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 bookings are recognized when the stays are completed. Results of Operations Six months ended March 31, 2002 compared to six months ended March 31, 2001: REVENUE We recognized revenue of approximately $4,037,000 from continuing operations for the period ended March 31, 2002, representing an increase of approximately $491,000 (14%) over revenues of approximately $3,546,000 for the same period last year. The increase in revenues is primarily the result of revenues generated from webcasting services as a result of the acquisition of MediaOnDemand during the period ended March 31, 2002. Revenues from the Webcasting Group accounted for approximately $1,924,000 for the period ended March 31, 2002 as compared to approximately $1,043,000 for the same period in 2001, which represents an increase of approximately $881,000 (84%). Included in revenue for the period ended March 31, 2002 is approximately $370,000 related to the construction of a studio for one of its customers. Revenues from the network equipment sales from the Networking Solutions Group accounted for approximately $508,000 for the period ended March 31, 2002 as compared to approximately $635,000 for the same period in 2001, which represents a decrease of approximately $127,000 (20%). The decrease is the result of fewer sales as a result of a decrease in demand following the September 11 tragedy. Revenues from network usage amounted to approximately $1,289,000 as compared to $1,238,000 representing an increase of $51,000 (4%.) Revenues from the Travel Group accounted for approximately $306,000 for the period ended March 31, 2002 as compared to approximately $357,000 for the same period in 2001, which represents 18 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) a decrease of approximately $51,000 (14%). The decrease is the result of lower production revenues as a result of fewer vignettes produced from the same period last year. During the period ended March 31, 2001, the Company had approximately $273,000 in other revenue associated with product sales for CareView and MedicalView. OPERATING EXPENSES Cost of webcasting revenue amounted to approximately $649,000 for the period ended March 31, 2002, as compared to approximately $536,000 for the same period last year, which represents an increase of approximately $113,000 due to additional expenses associated with MOD which is partially offset by greater efficiencies as a result of consolidating webcasting operations to the corporate office. Cost of revenue from the network equipment sales and rentals accounted for approximately $253,000 for the period ended March 31, 2002 as compared to approximately $400,000 for the same period in 2001, which represents a decrease of approximately $147,000 (37%) due to a decrease in sales and an increase in the margins on products sold. Cost of revenue from network usage accounted for approximately $790,000 for the period ended March 31, 2002 as compared to approximately $715,000 for the same period in 2001, which represents an increase of approximately $75,000 (10%) due to the growth in usage fees. Travel production and distribution cost of revenue for the period ended March 31, 2002 was approximately $59,000 representing a decrease of $7,000 (11%) from $66,000 for the same period last year. The decrease is the result of fewer production costs as a result of fewer vignettes produced. During the period ended March 31, 2001, the Company had approximately $65,000 in other costs associated with product sales for CareView and MedicalView. Compensation expense for the period ended March 31, 2002 of approximately $2,472,000 decreased approximately $70,000 or 3% from approximately $2,542,000 for the same period last year due to the acquisition of MOD offset by cost containment measures adopted during fiscal 2001. These cost containment measures resulted in reductions to the overall number of employees. Professional fees of approximately $736,000 for the period ended March 31, 2002 decreased approximately $227,000 (24%) from approximately $963,000 for the same period last year due to reduced legal, accounting and public filing fees associated with the Company's EDNET subsidiary. During 2001, Ednet was required to file separate financial statements with the SEC. Upon the Company's purchase of the remaining 49% of EDNET was no longer a separate public entity. Other administrative expenses of approximately $709,000 decreased $280,000 (28%) from $989,000 during the same period last year due to cost containment measures offset by the acquisition of MOD. Sales and marketing decreased $181,000 (64%) to $102,000 for the period ended March 31, 2002 as compared to $283,000 for the same period last year due to a reduction in advertising expenses as a part of the cost containment program. Depreciation and amortization of $892,000 for the period ended March 31, 2002 increased $278,000 from $614,000 for the same period last year due to the depreciation of assets acquired with MOD and the amortization of customer lists which is partially offset by the Company's adoption of SFAS142. Under SFAS142 goodwill and intangible assets with indefinite lives are no longer amortized but are reviewed annually for impairment. OTHER INCOME (EXPENSE) Other expense was $(3,973,000) during the period ended March 31, 2002 compared to approximately $(162,000) for the same period last year. A loss on investment of $3,573,000 was recorded due to the company fully reserving against the debenture received as proceeds from the sale of its Golf Society of the U.S. subsidiary. Interest expense amounted to $409,000 compared to $473,000 representing a decrease of $64,000 primarily due to interest, fees and amortization of debt issue costs associated with the 6% convertible debentures recognized last year. This interest expense recognized last year was 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 issued in connection with the debentures, both were non-cash expenses. Interest expense also increased 39,000 as a result of 19 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) additional debt and capital leases acquired with MOD. In addition, interest income was approximately $3,000 during the period ended March 31, 2002, representing a decrease of approximately $65,000 from approximately $68,000 for the same period last year. The decrease in interest income earned is the result of lower cash and cash equivalent balances during the period ended March 31, 2002. Other income was approximately $6,000 for the period ended March 31, 2002 as compared to other income of $243,000 for the same period last year. Included in the results from last year is a one-time refund from a third party telecommunications carrier. DISCONTINUED OPERATIONS Losses from discontinued operations amounted to approximately $763,000 for the period ended March 31, 2002 as compared to losses of $1,901,000 for the same period in 2001. As a result of our decision in December 2001 to sell our interest in the Golf, Leisure and Syndication Group, approximately $589,000 and $966,000 of operating losses for the periods ending March 31, 2002 and 2001, respectively are classified as discontinued operations. In December 2001, we also decided to cease operations in the Financial Solutions Group and have classified approximately $174,000 and $935,000 as discontinued operations for the period ended March 31, 2002 and 2001, respectively. Three months ended March 31, 2002 compared to three months ended March 31, 2001: REVENUE We recognized revenue of approximately $2,477,000 from continuing operations for the period ended March 31, 2002, representing an increase of approximately $625,000 (34%) over revenues of approximately $1,852,000 for the same period last year. The increase in revenues is primarily the result of revenues generated from webcasting associated with the acquisition of MOD. Revenues from the Webcasting Group accounted for approximately $1,391,000 for the period ended March 31, 2002 as compared to approximately $496,000 for the same period in 2001, which represents an increase of approximately $895,000 (180%), primarily the result of the MOD acquisition. One single customer, Lehman Brothers, accounted for 15% of total revenues for the period amounting to $368,000. This revenue was derived from the construction of a studio for this customer. Revenues from network equipment sales from the Networking Solutions Group accounted for approximately $310,000 for the period ended March 31, 2002 as compared to approximately $450,000 for the same period in 2001, which represents a decrease of approximately $140,000 (31%) due to reduced demand for network equipment post September 11. Revenues from network usage amounted to approximately $600,000 as compared to $602,000 representing a decrease of $2,000. Revenues from the Travel Group accounted for approximately $166,000 for the period ended March 31, 2002 as compared to approximately $193,000 for the same period in 2001, which represents a decrease of approximately $27,000 (14%.) 20 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) OPERATING EXPENSES Cost of webcasting revenue amounted to approximately $521,000 for the period ended March 31, 2002, as compared to approximately $190,000 for the same period last year, which represents an increase of approximately $331,000 (174%) due to additional costs associated with the acquisition of MOD offset by greater efficiencies as a result of consolidating webcasting operations to the corporate office. Cost of revenue from the network equipment sales and rentals accounted for approximately $165,000 for the period ended March 31, 2002 as compared to approximately $291,000 for the same period in 2001, which represents a decrease of approximately $126,000 (43%) due to reduced sales and greater margins on products sold. Cost of revenue from network usage accounted for approximately $385,000 for the period ended March 31, 2002 as compared to approximately $336,000 for the same period in 2001, which represents an increase of approximately $49,000 as a result of greater usage fees. Travel production and distribution cost of revenue for the period ended March 31, 2002 was approximately $33,000 representing a decrease of $14,000 (30%) from $47,000 for the same period last year as a result of fewer costs incurred for reduced production of vignettes. During the period ended March 31, 2001, the Company had approximately $13,000 in other costs associated with product sales for CareView and MedicalView. Compensation expense for the period ended March 31, 2002 of approximately $1,321,000 increased approximately $167,000 or 14% from approximately $1,154,000 for the same period last year due to cost containment measures adopted during fiscal 2001 offset by additional costs related to the acquisition of MOD. These cost containment measures resulted in reductions to the overall number of employees. Professional fees of approximately $438,000 for the period ended March 31, 2002 decreased approximately $111,000 (20%) from approximately $549,000 for the same period last year due to reduced legal, accounting and public filing fees associated with the company's EDNET subsidiary. During 2001, Ednet was required to file separate financial statements with the SEC. Upon the Company's purchase of the remaining 49% of EDNET was no longer a separate public entity. Other administrative expenses of approximately $364,000 decreased $82,000 (18%) from $446,000 during the same period last year due to cost containment measures offset by the acquisition of MOD. Sales and marketing decreased $18,000 to $45,000 for the period ended March 31, 2002 as compared to $63,000 for the same period last year due to a reduction in advertising expenses as a part of the cost containment program. Depreciation and amortization of $603,000 for the period ended March 31, 2002 increased $299,000 from $304,000 for the same period last year due the depreciation of assets acquired from MOD and the amortization of customer lists partially offset by the Company's adoption of SFAS142. Under SFAS142 goodwill and intangible assets with indefinite lives are no longer amortized but are reviewed annually for impairment. OTHER INCOME (EXPENSE) Other expense was $(3,794,000) during the period ended March 31, 2002 compared to approximately $(91,000) for the same period last year. A loss on debenture of $3,573,000 was recorded due to the Company fully reserving against the debenture received as proceeds from the sale of its Golf Society of the U.S. subsidiary. Interest expense amounted to $291,000 compared to $134,000 representing an increase of $157,000 primarily due to interest, fees and amortization of debt issue costs associated with the 6% convertible debentures recognized last year. This interest expense recognized last year was 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 issued in connection with the debentures, both were non-cash expenses. Interest expense also increased as a result of additional debt and capital leases acquired with MOD. Interest income was approximately $2,000 during the period ended March 31, 2002, representing a decrease of approximately $21,000 from approximately $23,000 for the same period last year. The decrease in interest income earned is the result of lower cash and cash equivalent balances during the period ended March 31, 2002. Other income was approximately $69,000 for the period ended March 31, 2002 as compared to other income of $20,000 for the same period last year. 21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) DISCONTINUED OPERATIONS Losses from discontinued operations amounted to approximately $2,000 for the period ended March 31, 2002 as compared to losses of $1,442,000 for the same period in 2001. As a result of our decision in December 2001 to sell our interest in the Golf, Leisure and Syndication Group, approximately $966,000 of operating losses are classified as discontinued operations for the period ended March 31, 2001. In December 2001, we also decided to cease operations in the Financial Solutions Group and have classified approximately $2,000 and $476,000 as discontinued operations for the periods ended March 31, 2002 and 2001, respectively. LIQUIDITY AND CAPITAL RESOURCES Our working capital deficit at March 31, 2002 was approximately $2,918,000, an increase of $2,299,000 from a deficit of $619,000 at September 30, 2001. The deterioration in working capital was primarily attributable to cash used in operating activities of $2,036,000 for the six-month period ended March 31, 2002. In addition, our accounts payable increased from $1,676,000 at September 30, 2001 to $2,757,000 at March 31, 2002, partially offset by an increase in accounts receivable from $1,227,000 at September 30, 2001 to $1,799,000 at March 31, 2002. Net cash provided by investing activities was $272,000 for the six-month period ended March 31, 2002, primarily due to satisfaction of the requirements necessary to convert restricted cash into unrestricted cash. Net cash provided by financing activities for the six-month period ended March 31, 2001 was $2,349,000. Principal sources of cash were proceeds from the issuance of equity and short-term debt securities of $3,036,000, partially offset by $687,000 of debt repayments. As of March 31, 2002, we have approximately $100,000 of cash. We are constantly evaluating our cash needs and existing burn rate. In addition, we have a plan whereby certain non-essential personnel and administrative costs will continue to be reduced so that we may continue to meet operating and financing obligations as they come due. Based upon an ongoing evaluation of our cash needs, we are seeking to raise additional capital through the sale of equity and debt securities to provide funding for ongoing future operations. No assurances can be given that we will be successful in obtaining additional capital, or that such capital will be available on terms acceptable to us. Further, there can be no assurance that even if such additional capital is obtained or the planned cost reductions are implemented, that we will achieve profitability or positive cash flow. On February 14, 2002, the Company received a letter from Nasdaq giving the Company 90 days (the first grace period) to comply with the $1.00 minimum bid price required to maintain listing on the Nasdaq National Market. The letter informed the Company that an application can be filed to transfer the Company to the SmallCap Market within the grace period. If the Company files a transfer application and pays the necessary fees, pending Staff's review of the transfer application, the Company can be transferred to the SmallCap Market. If the transfer application is approved, the Company will be afforded the 180 calendar day SmallCap Market grace period (the second grace period) from the date of the letter. The Company may also be eligible for an additional 180 calendar day grace period (The third grace period) provided it meets the initial listing criteria for the SmallCap Market. In addition, the Company may be eligible to transfer back to the Nasdaq National Market, without any additional fees, if by February 10, 2003 the Company maintains a bid price per share of $1.00 for 30 consecutive trading days and it has maintained all other continued listing requirements. On May 9, 2002, the Company filed for a transfer to the SmallCap Market. We currently comply with all other continued listing requirements of the SmallCap Market, and, therefore, do not see a reason that our transfer application will not be approved. 22 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 April 11, 2002. 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 2003 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, 2002; (3) The approval to increase the authorized shares of Visual Data common stock from 50,000,000 to 75,000,000; and (4) The approval of the amendment to the 1996 Stock Option Plan. The following six members of our Board of Directors were duly elected: Director Votes For Votes Against Votes Abstained -------- ---------- ------------- --------------- Randy S. Selman 13,310,839 174,938 221,434 Alan M. Saperstein 13,348,590 137,187 221,434 Benjamin Swirsky 13,481,813 3,964 221,434 Brian K. Service 13,481,853 3,924 221,434 Eric Jacobs 13,444,493 41,284 221,434 Robert J. Wussler 13,481,874 3,903 221,434 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, 2002, are as follows: Votes For Votes Against Abstentions ----------- ------------- ----------- 12,268,263 1,343,007 97,363 The approval to increase authorized shares of Visual Data common stock from 50,000,000 to 75,000,000: Votes For Votes Against Abstentions ----------- ------------- ----------- 13,048,019 615,906 44,708 23 The approval of an amendment to the 1996 Stock Option Plan: Votes For Votes Against Abstentions ----------- ------------- ----------- 4,417,279 816,100 293,926 Item 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K. Reports on Form 8-K On January 10, 2002 we filed a Report on Form 8-K with the Securities and Exchange Commission disclosing, under Item 2., the Stock Purchase Agreement with Golf Society International, Inc. On January 25, 2002 we filed a Report on Form 8-K with the Securities and Exchange Commission disclosing, under Item 2., the acquisition of Media on Demand.com, Inc. On February 7, 2002 we filed a Report on Form 8-K/A with the Securities and Exchange Commission disclosing, under Item 2., the acquisition of Media on Demand.com, Inc. On March 19, 2002 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 Media on Demand.com, Inc. 24 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 corporationDate: May 15, 2002 /s/ Randy S. Selman - ---------------------------------------- Randy S. Selman, President and Chief Executive Officer /s/ Gail L. Babitt - ---------------------------------------- Chief Financial Officer and Principal Accounting Officer 25 -----END PRIVACY-ENHANCED MESSAGE-----