1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT TO CURRENT REPORT
FILED PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): DECEMBER 30, 2000
(OCTOBER 30, 2000)
EDGAR ONLINE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 0-26071 06-1447017
(STATE OR OTHER JURISDICTION (COMMISSION (I.R.S. EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
50 WASHINGTON STREET
NORWALK, CONNECTICUT 06854
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, WITH ZIP CODE)
(203) 852-5666
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
2
The undersigned registrant hereby amends the following items, financial
statements, exhibits, or other portions of the Current Report on Form 8-K filed
by the registrant on November 9, 2000 as set forth on the pages attached hereto:
ITEM 7. Financial Statements, Pro Forma Financial Information And Exhibits
(A) Financial Statements Of Business Acquired
Financial Insight Systems, Inc.:
Financial Statements for the Years Ended December 31, 1997, 1998
and 1999 and Independent Auditors Report
3
FINANCIAL INSIGHT SYSTEMS, INC.
Financial Statements
December 31, 1997, 1998 and 1999
(With Independent Auditors' Report Thereon)
4
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Financial Insight Systems, Inc.
We have audited the accompanying balance sheets of Financial Insight Systems,
Inc. as of December 31, 1998 and 1999 and the related statements of operations,
changes in stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Financial Insight Systems, Inc.
as of December 31, 1998 and 1999 and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States of
America.
KPMG LLP
October 27, 2000
McLean, Virginia
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FINANCIAL INSIGHT SYSTEMS, INC.
Balance Sheets
SEPTEMBER 30,
DECEMBER 31, 2000
ASSETS 1998 1999 (UNAUDITED)
----------- --------- ---------
Current assets:
Cash and cash equivalents $ 5,953 3,980 637,686
Accounts receivable, net of allowance for doubtful
accounts 643,109 1,084,600 1,213,980
Deferred taxes -- 14,194 --
Income taxes recoverable -- -- 979,500
Prepaid expenses 8,190 -- 16,153
----------- --------- ---------
Total current assets 657,252 1,102,774 2,847,319
Property and equipment, net 438,783 577,275 851,219
Investments -- 50,182 --
----------- --------- ---------
Total assets $ 1,096,035 1,730,231 3,698,538
=========== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $ 62,102 76,631 576,596
Accounts payable 113,144 93,430 357,767
Checks in excess of cash 62,601 22,651 --
Amounts due to stockholder 21,578 24,315 31,985
Income taxes payable 17,986 336,762 --
Deferred taxes 112,160 -- --
Line of credit 200,000 200,000 475,000
----------- --------- ---------
Total current liabilities 589,571 753,789 1,441,348
----------- --------- ---------
Total liabilities 589,571 753,789 1,441,348
----------- --------- ---------
Stockholders' equity:
Common stock, no par value, 1,000,000 shares
authorized, 410,000 shares issued and outstanding at
December 31, 1999 and 1998 respectively, and 500,000
issued and outstanding at September 30, 2000 2,655,100 2,271,600 5,518,060
Deferred stock-based compensation (1,350,452) (2,572) (877,951)
Accumulated deficit (798,184) (1,292,586) (2,382,919)
----------- --------- ---------
Total stockholders' equity 506,464 976,442 2,257,190
----------- --------- ---------
Total liabilities and stockholders' equity $ 1,096,035 1,730,231 3,698,538
=========== ========= =========
See accompanying notes to financial statements.
6
FINANCIAL INSIGHT SYSTEMS, INC.
Statements of Operations
NINE MONTHS ENDED
SEPTEMBER 30,
YEARS ENDED DECEMBER 31, 1999 2000
1997 1998 1999 (UNAUDITED) (UNAUDITED)
----------- --------- --------- --------- ---------
Revenues $ 2,309,126 3,910,133 6,414,386 4,594,258 6,055,738
Cost of revenues (including stock-based compensation of
$-0-, $363,440 and $373,077 in the years ended 1997,
1998 and 1999, respectively and $283,348 and $380,774
in the nine month periods ended September 30, 1999
and 2000, respectively) 862,988 1,723,823 2,617,741 1,748,326 2,786,074
----------- --------- --------- --------- ---------
Gross profit 1,446,138 2,186,310 3,796,645 2,845,932 3,269,664
Operating expenses:
General and administrative (including stock-based
compensation of $-0-, $941,108 and $591,303 in 1997,
1998 and 1999, respectively, and $446,356 and $1,353,877
in the nine month periods ended September 30, 1999 and
2000, respectively) 1,191,471 2,540,665 3,153,515 2,143,559 3,318,354
Product development (including stock-based compensation
of $258,930 in the nine month period ended September 30,
2000) 289,290 417,621 814,302 516,111 1,278,843
----------- --------- --------- --------- ---------
1,480,761 2,958,286 3,967,817 2,659,670 4,597,197
----------- --------- --------- --------- ---------
Income (loss) from operations (34,623) (771,976) (171,172) 186,262 (1,327,533)
Interest and other income 8,636 38,420 24,726 12,250 6,548
Interest expense and other, net (1,796) (10,756) (10,804) (10,119) (34,872)
----------- --------- --------- --------- ---------
Income (loss) before income taxes (27,783) (744,312) (157,250) 188,393 (1,355,857)
Provision (benefit) for income taxes (6,513) 203,104 337,152 357,544 (615,806)
----------- --------- --------- --------- ---------
Net loss $ (21,270) (947,416) (494,402) (169,151) (740,051)
=========== ======== ======== ======== ========
See accompanying notes to financial statements.
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FINANCIAL INSIGHT SYSTEMS, INC.
Statements of Changes in Stockholders' Equity
RETAINED
COMMON STOCK DEFERRED EARNINGS
SHARES ISSUED COMMON STOCK-BASED ACCUMULATED
(IN THOUSANDS) STOCK COMPENSATION DEFICIT TOTAL
----------- ----------- ------------ ------------- -----------
Balance at December 31, 1996 185 $100 -- 170,502 170,602
Net loss -- -- -- (21,270) (21,270)
----------- ----------- ------------ ----------- -----------
Balance at December 31, 1997 185 100 -- 149,232 149,332
Additional shares issued to founder 225 -- -- -- --
Deferred stock-based compensation -- 2,655,000 (2,655,000) -- --
Amortization of deferred stock-based
compensation -- -- 1,304,548 -- 1,304,548
Net loss -- -- -- (947,416) (947,416)
----------- ----------- ------------ ----------- -----------
Balance at December 31, 1998 410 2,655,100 (1,350,452) (798,184) 506,464
Net loss -- -- -- (494,402) (494,402)
Deferred stock-based compensation -- (383,500) 383,500 -- --
Amortization of deferred stock-based
compensation -- -- 964,380 -- 964,380
----------- ----------- ------------ ----------- -----------
Balance at December 31, 1999 410 2,271,600 (2,572) (1,292,586) 976,442
Net loss (unaudited) -- -- -- (740,051) (740,051)
Dividend paid (unaudited) -- -- -- (350,282) (350,282)
Deferred stock-based compensation (unaudited) -- 2,868,960 (2,868,960) -- --
Amortization of deferred stock-based
compensation (unaudited) -- -- 1,993,581 -- 1,993,581
Issue of stock (unaudited) 90 377,500 -- -- 377,500
----------- ----------- ------------ ----------- -----------
Balance at September 30, 2000 (unaudited) 500 $5,518,060 (877,951) (2,382,919) 2,257,190
=========== =========== ============ =========== ===========
See accompanying notes to financial statements.
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FINANCIAL INSIGHT SYSTEM
Statements of Cash Flows
NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED DECEMBER 31, 1999 2000
1997 1998 1999 (UNAUDITED) (UNAUDITED)
---------- -------- -------- -------- --------
Cash flows from operating activities:
Net loss $ (21,270) (947,416) (494,402) (169,151) (740,051)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization of stock-based compensation -- 1,304,548 964,380 729,704 1,993,581
Depreciation and amortization 71,105 98,566 177,632 100,151 158,398
Allowance for doubtful accounts -- -- -- -- 7,375
Deferred taxes (73,761) 113,300 (126,354) (120,000) 14,194
Changes in assets and liabilities:
Accounts receivable 184,500 (427,773) (441,491) (576,826) (136,755)
Other current assets -- (8,190) 8,190 (11,731) (16,153)
Accounts payable and accrued expenses 36,604 2,113 (5,185) 156,092 764,302
Amounts due to stockholder (49,017) 16,841 2,737 2,052 7,670
Checks in excess of cash 80,182 (91,766) (39,950) (12,651) (22,651)
Income taxes payable/recoverable (5,322) 14,646 318,776 364,014 (1,316,262)
---------- -------- -------- -------- --------
Total adjustments 244,291 1,022,285 858,735 630,805 1,453,699
---------- -------- -------- -------- --------
Net cash provided by operating activities 223,021 74,869 364,333 461,654 713,648
---------- -------- -------- -------- --------
Cash flows from investing activities:
Purchase of investments -- -- (50,182) (50,182) (300,100)
Purchases of property and equipment (219,458) (274,573) (316,124) (214,171) (432,342)
---------- -------- -------- -------- --------
Net cash used in investing activities (219,458) (274,573) (366,306) (264,353) (732,442)
---------- -------- -------- -------- --------
Cash flows from financing activities:
Issue of common stock -- -- -- -- 377,500
Borrowings under line of credit, net -- 200,000 -- -- 275,000
Repayment of line of credit -- -- -- (200,000) --
---------- -------- -------- -------- --------
Net cash provided by financing activities -- 200,000 -- (200,000) 652,500
---------- -------- -------- -------- --------
Net increase/(decrease) in cash and cash
equivalents 3,563 296 (1,973) (2,699) 633,706
Cash and cash equivalents at beginning of year 2,094 5,657 5,953 5,953 3,980
---------- -------- -------- -------- --------
Cash and cash equivalents at end of year $ 5,657 5,953 3,980 3,254 637,686
========== ======== ======== ======== ========
Supplemental disclosure of cash flow information:
Interest paid $ 2,696 6,344 5,659 5,659 48,309
========== ======== ======== ======== ========
Income taxes paid $ 72,570 75,158 144,730 113,530 686,262
========== ======== ======== ======== ========
Non-cash distribution of investments to shareholder $ -- -- -- -- 350,282
========== ======== ======== ======== ========
See accompanying notes to financial statements.
9
FINANCIAL INSIGHT SYSTEMS, INC.
Notes to Financial Statements
December 31, 1997, 1998, 1999
(Information related to September 30, 1999 and 2000 subsequent to
December 31, 1999 is unaudited)
(1) DESCRIPTION OF BUSINESS AND ACQUISITION
Financial Insight Systems, Inc. (the Company), was founded in 1995 and
develops and supports Internet-based financial and business system
solutions. Its products assist Companies in providing their clients with
access to up-to-date company and market news and information. The Company
also provides consulting services in the areas of database design and
maintenance, web strategy and special projects.
On October 18, 2000 the Company entered into an Agreement and Plan of
Merger with FIS Acquisition Corp., a wholly-owned subsidiary of EDGAR
Online, Inc. under which FIS Acquisition Corp. acquired on October 30,
2000 (the Acquisition), all issued and outstanding shares of common
stock of the Company. Consideration for the transaction consisted of
$11,765,000 in cash, a series of two year 7.5% Senior Subordinated
Secured Promissory Notes of EDGAR Online, Inc. in the principal amount of
$6 million and 2,450,000 restricted shares of common stock of Edgar
Online, Inc.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) REVENUE RECOGNITION
Revenue from short term fixed price contracts which call for
specific contract deliverables is recognized on completion of the
contract and on receipt of customer acceptance that the
contractual terms have been satisfied. Revenue from time and
materials type contracts is recognized as earned. Revenue from
contracts which require the Company to provide specified services
over a period of time are recognized as those services are
delivered.
(b) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of ninety days or less to be cash equivalents.
(c) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is
computed using the straight-line method over the estimated useful
lives of the related assets, generally three to seven years.
Leasehold improvements are amortized using the straight-line
method over the estimated useful lives of the assets or the term
of the leases, whichever is shorter.
(d) RECOVERY OF LONG LIVED ASSETS
The Company's policy is to review its long-lived assets for
impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. The Company
measures whether an impairment loss exists when the sum of the
expected future undiscounted cash flows is less than the carrying
amount of the asset. The measurement of the impairment loss to be
recognized is based upon the difference between the fair value and
the carrying amount of the assets.
(e) SALES AND MARKETING EXPENSES
The Company expenses sales and marketing expenses when incurred.
Advertising expenses were $7,562, $17,997 and $26,115 in 1997,
1998 and 1999 respectively.
(f) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases, and for operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. Deferred tax assets
are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.
10
FINANCIAL INSIGHT SYSTEMS, INC.
Notes to Financial Statements
December 31, 1997, 1998, 1999
(Information related to September 30, 1999 and 2000 subsequent to
December 31, 1999 is unaudited)
(g) STOCK-BASED TRANSACTIONS
The Company accounts for stock-based transactions with employees
in accordance with Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock-Based Compensation" (SFAS
123). In accordance with SFAS 123, the Company has elected to
measure stock-based employee compensation arrangements in
accordance with the provisions of APB No. 25, "Accounting for
Stock Issued to Employees," (APB 25) and comply with the
disclosure provisions of SFAS No. 123. Under APB 25, compensation
expense is measured based on the difference, if any, on the date
of grant between the fair value of the Company's common stock and
the exercise price.
(h) CONCENTRATION OF RISK AND FINANCIAL INSTRUMENTS
Financial instruments that potentially subject the Company to
significant concentration of credit risk consist of accounts
receivable. The most significant concentrations of credit risk at
December 31, 1998 and 1999 related to two customers who comprised
31% and 59%, and 35% and 46%, of the Company's total gross
receivable balance respectively. No other customers accounted for
more than 10% of accounts receivable at either December 31, 1998
or 1999. The Company has not experienced any significant credit
losses to date from any one customer.
The Company's customers are almost entirely based in the United
States. One customer accounted for 83%, 80% and 73% of gross
revenues in the years ended December 31, 1997, 1998 and 1999
respectively. No other customer accounted for more than 15% of
sales during 1997, 1998 or 1999.
(i) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's cash and cash equivalents,
accounts receivable, accounts payable, accrued liabilities and
line of credit at December 31, 1998 and 1999, approximate their
financial statement carrying value because of the short-term
maturity of these instruments.
(j) COMPREHENSIVE INCOME
The Company adopted the provisions of SFAS No. 130, "Reporting
Comprehensive Income" (SFAS 130) during 1998. SFAS 130 requires
the Company to report in its financial statements, in addition to
its net income (loss), comprehensive income (loss), which includes
all changes in equity during a period from non-owner sources
including, as applicable, foreign currency items, minimum pension
liability adjustments and unrealized gains and losses on certain
investments in debt and equity securities. The Company does not
have any items of comprehensive income (loss) that are not
included in net income (loss).
(k) SEGMENTS
The Company operates in a single reportable segment.
(l) INVESTMENTS
The Company records its less than 20% owned investments at cost.
Management believes that the fair market value of its investments
are not lower than original cost.
(m) UNAUDITED INTERIM FINANCIAL INFORMATION
The interim balance sheet of the Company as of September 30, 2000
and the statements of operations, changes in stockholders' equity
and cash flows for the nine months ended September 30, 1999 and
2000 are unaudited. Certain information and note disclosures
normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States
of America have been condensed or omitted. In the opinion of
management, all adjustments, consisting only of normal recurring
adjustments, necessary for the fair preparation of the financial
position and results of operations and cash flows, have been
included in such unaudited financial statements. The results of
operations for the nine months ended September 30, 2000 are not
necessarily indicative of the results to be expected for the
entire year.
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FINANCIAL INSIGHT SYSTEMS, INC.
Notes to Financial Statements
December 31, 1997, 1998, 1999
(Information related to September 30, 1999 and 2000 subsequent to
December 31, 1999 is unaudited)
(n) USE OF ESTIMATES IN FINANCIAL STATEMENTS
The preparation of financial statements in conformity with
generally accepted accounting principles 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 revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(3) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 and 1999 is summarized as
follows:
1998 1999
--------- -------
Equipment, furniture and fixtures $ 134,618 188,648
Computers 367,576 572,722
Automobiles 67,163 64,754
Leasehold improvements 48,126 69,510
--------- -------
Subtotal 617,483 895,634
Less: Accumulated depreciation
and amortization (178,700) (318,359)
--------- -------
$ 438,783 577,275
========= =======
Depreciation and amortization expense for the years ended December 31,
1997, 1998 and 1999 was $71,105, $98,566 and $177,632, respectively.
(4) ACCRUED EXPENSES
Accrued expenses consist of the following at December 31, 1998 and 1999:
1998 1999
------- ------
Accrued pension costs $35,535 --
Accrued rent 26,567 76,631
------- ------
$62,102 76,631
======= ======
The Company matches pension contributions made by certain employees into
personal pension plans. The Company does not operate any pension or
similar post retirement benefit plans. Accrued pension costs relates to
amounts due but not yet remitted by the Company.
(5) LINE OF CREDIT
In October 1998, the Company entered into an agreement with Potomac
Valley Bank for a $200,000 line of credit. This agreement was extended in
April 2000 to a $500,000 line of credit. This facility is repayable on
demand. The interest rates at December 31, 1998 and 1999 were 8.25% and
9.0% respectively. The interest rate is 1/2% over the Potomac Valley
Bank Prime Rate of Interest.
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FINANCIAL INSIGHT SYSTEMS, INC.
Notes to Financial Statements
December 31, 1997, 1998, 1999
(Information related to September 30, 1999 and 2000 subsequent to
December 31, 1999 is unaudited)
(6) STOCKHOLDER LOANS
The principal stockholder of the Company has advanced funds to and
borrowed funds from the Company at various times. Interest has been
charged at 1% on the average monthly outstanding balance. Included
within interest expense and other, net for fiscal 1998 and 1999 is
interest charged to the Company under this arrangement of $5,921 and
$2,737 respectively. Included within interest and other income in
fiscal 1997 is $3,362 charged to the principal stockholder under this
arrangement. For the nine months ended September 30, 1999 and 2000
interest expense associated with these stockholder loans was $2,052 and
$7,683, respectively.
(7) INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 1997, 1998
and 1999 consists of:
CURRENT DEFERRED TOTAL
--------- -------- -----
Year ended December 31, 1997:
U.S. Federal $ 53,556 (58,742) (5,186)
State and local 13,692 (15,019) (1,327)
------- -------- -----
$ 67,248 (73,761) (6,513)
========= ======= ======
Year ended December 31, 1998:
U.S. Federal, inclusive of
valuation allowance $ 73,302 178,604 251,906
State and local 16,502 (65,304) (48,802)
--------- ------- ------
$ 89,804 113,300 203,104
========= ======= =======
Year ended December 31, 1999:
U.S. Federal, inclusive
of valuation allowance 382,985 (36,058) 346,927
State and local 80,521 (90,296) (9,775)
--------- ------- ------
463,506 (126,354) 337,152
========= ======= =======
The Company's tax expense (benefit) differed from the amount computed
using the federal statutory rate of 34% as follows:
1997 1998 1999
--------- -------- -------
Expected federal income tax at 34% $ (9,446) (253,066) (53,466)
State taxes (1,327) (48,802) (9,775)
Effect of sur tax exemption 2,004 32,370 11,307
Other permanent differences 2,256 1,881 1,228
Valuation allowance -- 470,721 387,858
--------- -------- -------
$ (6,513) 203,104 337,152
========= ======= =======
All income tax liabilities are expected to be paid within one year of the
balance sheet date.
13
FINANCIAL INSIGHT SYSTEMS, INC.
Notes to Financial Statements
December 31, 1997, 1998, 1999
(Information related to September 30, 1999 and 2000 subsequent to
December 31, 1999 is unaudited)
The Company's deferred tax assets (liabilities) as of December 31, 1998
and 1999 are as follows:
1998 1999
--------- ------
Deferred tax asset:
Depreciation $ (19,158) (8,227)
Stock-based compensation 470,721 858,579
Other short term timing differences (93,002) 22,421
Valuation allowance (470,721) (858,579)
--------- ------
$(112,160) 14,194
========= ======
The Company may receive a tax deduction at a future date in respect of
the stock-based compensation reflected in the income statement
(see events subsequent to December 31, 1999 below). The availability
of the deduction will depend on the vesting and subsequent exercise of
the options related to this stock-based compensation. As the events
that are required to occur to generate such a deduction are not
under the direct control of the Company but rather, require employees of
the Company to take certain actions, management did not consider the
generation of such a deduction as more likely that not. Accordingly,
management has created a valuation allowance against the deferred tax
asset that arises as of December 31, 1998 and 1999 in connection with
this stock-based compensation expense.
During the nine months ended September 30, 2000, certain stock options
were exercised by employees. These exercises generated a tax deduction
for the Company of approximately $4,750,000 and a corresponding tax
benefit of approximately $1,800,000.
In the nine months ended September 30, 2000, largely as a result of the
above tax deductions, the Company generated a net operating loss of
approximately $4,100,000. Of this amount, approximately $1,750,000 is
expected to be realized through carryback to recover approximately
$630,000 of income taxes paid for the years ended December 31, 1997,
1998 and 1999. In addition, the income taxes recoverable at September
30, 2000 includes the recovery of estimated income tax payments of
$349,200 made for 2000. The tax benefit associated with the $2,350,000
net operating losses available for carryforward at September 30, 2000 has
been recorded as a deferred tax asset with a valuation allowance of like
amount as management has concluded that realization of the tax benefit is
not considered more likely than not. Should these tax benefits be
realized, approximately $300,000 of the reduction in the valuation
allowance would be recorded as a decrease to income tax expense for that
portion relating to stock-based compensation expense previously recorded
and $600,000 would be credited to paid in capital since no compensation
expense has been previously recorded.
During the nine months ended September 30, 2000, the valuation allowance
increased by a net of $280,000.
(8) STOCKHOLDERS' EQUITY
Upon the formation of the Company in 1995, the founder was issued 100
shares of the Company's common stock for consideration of $100. The
authorized capital was 1,000 shares of common stock. In 1998, the Company
issued a further 225 shares of its common stock to the founder for no
consideration, under a transaction which was accounted for as a stock
split.
On March 28, 2000 the Board of Directors authorized an increase in the
common stock of the Company to 1,000,000 shares by way of a 1,000 for 1
stock split. All share data has been presented reflecting this 1,000 for
1 stock split.
(9) STOCK OPTION PLANS
Effective November 25, 1998, the Company adopted the Incentive Stock
Option Plan (the Plan) whereby the Company's Board of Directors may grant
stock options to officers, employees, directors and consultants. The Plan
authorized the issuance of options to purchase up to 90,000 shares of the
Company's common stock. The exercise price, duration of the option, and
the vesting schedule for the options will be established by the Board at
the date of grant. All options under the Plan were issued in 1998.
The issued options vest in two installments with all options vesting
fully by January 1, 2000 and would, absent other circumstances, expire
10 years after grant. These options were all granted to employees of the
Company.
14
FINANCIAL INSIGHT SYSTEMS, INC.
Notes to Financial Statements
December 31, 1997, 1998, 1999
(Information related to September 30, 1999 and 2000 subsequent to
December 31, 1999 is unaudited)
Option activity for the Plan during the periods indicated is as follows:
WEIGHTED
NUMBER OF AVERAGE
OPTIONS OPTION PRICE
-------------- ----------------
Outstanding at December 31, 1997 -- $ --
Granted 90,000 3.50
Exercised -- --
Cancelled -- --
---- -------
Outstanding at December 31, 1998 90,000 3.50
Granted -- --
Exercised -- --
Cancelled (25,000) 3.50
---- -------
Outstanding at December 31, 1999 65,000 $ 3.50
==== =======
At December 31, 1999, 32,500 options were vested and exercisable with an
exercise price of $3.50 per option and a weighted average life of 9
years. The remaining 32,500 options vested and became exercisable with an
exercise price of $3.50 per option on January 1, 2000. The options expire
in 2008.
At December 31, 1999, no options are available for grant under the Plan.
Effective May 15, 2000, the Company adopted the Year 2000 Stock Option
Plan (the 2000 Plan) whereby the Company's Board of Directors may grant
stock options to officers, employees, directors and consultants. The Plan
authorized the issuance of options to purchase up to 100,000 shares of
the Company's common stock. The exercise price, duration of the option,
and the vesting schedule for the options will be established by the Board
at the date of grant.
Option activity for the 2000 Plan for the nine months ended September 30,
2000 is as follows:
WEIGHTED
NUMBER OF AVERAGE
OPTIONS OPTION PRICE
--------------- ------------
Outstanding at December 31, 1999 -- $ --
Granted 51,600 6.00
Exercised (25,000) 6.00
Cancelled -- --
----- --------
Balance at September 30, 2000 26,600 $ 6.00
===== ========
For options granted during the nine months ended September 30, 2000,
25,000 vest in equal installments over the first 24 months of employment
(retroactive to original employment date) of the grantee. The remaining
granted options vest in equal installments over a 48 month period
commencing 12 months after the employment (retroactive to original
employment date) of the grantee. Absent other circumstances, the options
expire 10 years after grant. These options were all granted to employees
of the Company. Of the outstanding options at September 30, 2000, 6,503
are vested and exercisable with an exercise price of $6.00 per option.
The remaining outstanding options vest over periods that do not extend
beyond September 30, 2005. At September 30, 2000 there are 48,400 options
available for grant.
During October 2000, the Company entered into agreements with the holders
of the 6,503 options whereby the Company paid amounts totaling
approximately $330,000 to grantees in exchange for the cancellation of
their outstanding options. In addition, during October 2000, 20,097
options held by employees that were not vested were cancelled.
15
FINANCIAL INSIGHT SYSTEMS, INC.
Notes to Financial Statements
December 31, 1997, 1998, 1999
(Information related to September 30, 1999 and 2000 Subsequent to
December 31, 1999 is unaudited)
As discussed in note 2, the Company has elected to continue to use APB 25
to measure compensation expenses related to employee stock options and
has recorded compensation expense where the exercise price of the option
was less than the fair value of the stock on the date of grant. Had the
Company determined compensation expense based on the fair value of the
option on the grant date under SFAS 123, the Company's results of
operations for the years ended December 31, 1997, 1998 and 1999 and the
nine months ended September 30, 1999 and 2000 would have been reduced to
the pro forma amounts indicated below.
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- --------------------
1997 1998 1999 1999 2000
------- ------- ------- ------- -------
Net loss - as reported $21,270 947,416 494,402 169,151 740,051
======= ======= ======= ======= =======
Net loss - pro forma $21,270 991,196 526,766 193,640 786,716
======= ======= ======= ======= =======
The fair value of the options granted to employees in 1998, as calculated
under SFAS 123, was $30.49 per share. The fair value of the options was
calculated using risk free interest rates of 4.78%, expected life of 7
years and no expected dividend yield or volatility.
The fair value of the options granted to employees in 2000, as calculated
under SFAS 123, was $57.72 per share. The fair value of the options was
calculated using risk free interest rates of 6.33%, expected life of 7
years and no expected dividend yield or volatility.
(10) COMMITMENTS AND CONTINGENCIES
The Company leases space in Rockville, Maryland for its primary offices.
Rent expense charged to income totaled $131,960, $254,313 and $464,011
for the years ended December 31, 1997, 1998 and 1999, respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December
31, 1999 are as follows:
OPERATING LEASES
----------------
Year ending December 31,
2000 $ 449,202
2001 462,663
2002 476,549
2003 490,836
Thereafter 779,814
----------
Total $2,659,064
==========
In October 1998, in addition to the line of credit detailed in Note 5,
the Company entered into an agreement with Potomac Valley Bank for a
$208,752 letter of credit to secure the lease payments in the event of
default. The letter of credit is secured by the assets of the Company.
There was no balance drawn under the letter of credit at December 31,
1998 or 1999. Starting on October 1, 2000, the letter of credit will
decrease by approximately $35,000 each year through September 30, 2005.
16
(B) Pro Forma Financial Information
Effective October 30, 2000 the Company acquired Financial Insight
Systems, Inc. ("FIS") for approximately $28.2 million, including acquisition
costs. This acquisition was accounted for as a purchase business combination.
The unaudited pro forma condensed consolidated balance sheet and
statement of operations have been prepared by combining the historical financial
statements of the Company with the historical financial statements of FIS and
applying pro forma adjustments to the combined amounts assuming the acquisition
had occurred as of September 30, 2000 with respect to the pro forma unaudited
condensed consolidated balance sheet and as of January 1, 1999 and January 1,
2000 with respect to the unaudited pro forma condensed consolidated statements
of operations for the year ended December 31, 1999 and the nine months ended
September 30, 2000.
The pro forma financial information is intended for informational
purposes only and is not necessarily indicative of the future financial position
or results of operations of the consolidated company after the acquisition. In
addition, the pro forma financial information is not necessarily indicative of
the actual results that would have occurred had the acquisition been effected on
January 1, 1999 or January 1, 2000. The pro forma balance sheet and statements
of operations and accompanying notes should be read in connection with and are
qualified by the historical financial statements of the Company and notes
thereto.
17
EDGAR Online, Inc.
Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of September 30,2000 (in thousands)
September 30, 2000
September 30, 2000 September 30, 2000 Pro Forma Pro Forma
EDGAR Online FIS Adjustments As Adjusted
Cash and investments $ 17,859 $ 638 $(11,765)(c) $ 6,732
Accounts receivable, net 1,915 1,214 3,129
Income tax recoverable -- 980 980
Other 201 16 217
-------- ------- --------- --------
Total current assets 19,975 2,848 (11,765) 11,058
Fixed assets 2,587 851 3,438
Intangible assets 9,002 -- 25,888 (a),(b),(c),(d),(e) 34,890
Other assets 296 -- 296
-------- ------- --------- --------
Total assets $ 31,860 $ 3,699 $ 14,123 $ 49,682
======== ======= ======== ========
Accounts payable and accrued expenses $ 2,076 $ 935 $ 800(e) $ 3,811
Deferred revenue 773 -- 773
Notes payable -- 475 475
Current portion of capital leases payable 75 -- 75
Other -- 32 32
-------- ------- --------- --------
Total current liabilities 2,924 1,442 800 5,166
Notes payable -- -- 6,000(b) 6,000
Capital leases payable, long-term 16 -- 16
-------- ------- --------- --------
Total liabilities 2,940 1,442 6,800 11,182
Preferred stock -- -- --
Common stock 125 5,518 (5,493)(a),(d) 150
Additional paid-in capital 43,925 -- 9,555(a),(d) 53,480
Deferred compensation -- (878) 878 --
Accumulated deficit (15,130) (2,383) 2,383(d) (15,130)
-------- ------- --------- --------
Total stockholders equity 28,920 2,257 7,323 38,500
Total liabilities and
stockholders equity $ 31,860 $ 3,699 $ 14,123 $ 49,682
======== ======= ========= ========
18
EDGAR(R) Online, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For Nine Months Ended September 30, 2000 (in thousands)
Nine Months Ended Nine Months Ended
September 30, 2000 September 30, 2000 Pro Forma Pro Forma As
EDGAR Online FIS Adjustments Adjusted
Total revenues $ 6,717 $ 6,056 $ -- $ 12,773
Total cost of revenues 2,028 2,786 -- 4,814
-------- -------- -------- --------
Gross profit 4,689 3,270 -- 7,959
Operating expenses 11,815 4,597 1,941 (a) 18,353
-------- -------- -------- --------
Loss from operations (7,126) (1,327) (1,941) (10,394)
Other income 905 (28) (766)(b),(c) 111
-------- -------- -------- --------
Loss before income taxes (6,221) (1,355) (2,707) (10,283)
Income tax expense -- 615 -- 615
-------- -------- -------- --------
Net loss $ (6,221) $ (740) $ (2,707) $ (9,668)
======== ======== ======== ========
Basic and diluted
weighted average shares
outstanding (d) 12,459 2,450 14,909
======== ======== ========
Basic and diluted net loss
per share (d) $ (0.50) $ (0.65)
======== ========
19
EDGAR Online, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1999 (in thousands)
Year ended Year ended December 31, 1999
December 31, 1999 December 31, 1999 Pro Forma Pro Forma
EDGAR Online FIS Adjustments As Adjusted
Total revenues $ 5,249 $ 6,414 $ -- $ 11,663
Total cost of revenues 1,489 2,618 -- 4,107
-------- -------- -------- --------
Gross profit 3,760 3,796 -- 7,556
Operating expenses 8,677 3,968 2,588 (a) 15,233
-------- -------- -------- --------
Loss from operations (4,917) (172) (2,588) (7,677)
Other income 754 15 (802)(b),(c) (33)
-------- -------- -------- --------
Loss before income taxes (4,163) (157) (3,390) (7,710)
Income tax expense -- (337) -- (337)
-------- -------- -------- --------
Net loss $ (4,163) $ (494) (3,390) (8,047)
======== ======== ======== ========
Basic and diluted
weighted average shares
outstanding (d) 9,805 2,450 12,255
======== ======== ========
Basic and diluted net
loss per share(d) $ (0.42) $ (0.66)
======== ========
20
EDGAR Online, Inc. and Financial Insight Systems, Inc.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
1. On October 30, 2000, EDGAR Online, Inc. ("the Company") acquired Financial
Insight Systems, Inc. (FIS), a private Maryland Corporation pursuant to the
items and conditions of an agreement and plan of merger dated October 18,
2000 for approximately $28.2 million. The purchase price included (1) the
issuance of 2,450,000 restricted shares of EDGAR Online common stock valued
at approximately $9.6 million, (2) The payment of $17,765,000 consisting
of (i) a cash payment of $11,765,000 and (ii) a series of two year 7.5%
senior subordinated secured promissory notes on the total principal amount
of $6,000,000 and (3) approximately $0.8 million in cash for the payment of
fees and acquisition related expenses. The acquisition was accounted for
under the purchase method of accounting. The unaudited pro forma condensed
consolidated information has been prepared by combining the historical
financial statements of the Company with the historical financial
statements of FIS and applying pro forma adjustments to the combined
amounts assuming the acquisition had occurred as of September 30, 2000 with
respect to the pro forma unaudited condensed consolidated balance sheet and
as of January 1, 1999 and 2000 with respect to the unaudited pro forma
condensed consolidated statements of operations.
The estimated excess purchase price over the fair value of the net
tangible assets acquired is labeled intangibles in the accompanying pro
forma unaudited condensed consolidated balance sheet based on the
preliminary assignment of fair values to the net assets acquired and is
being amortized over ten years, the estimated blended useful life of the
intangibles.
2. The unaudited pro forma balance sheet includes the following adjustments:
(a) To reflect the issuance of 2,450,000 shares of EDGAR Online, Inc.
common stock.
(b) To reflect the issuance of $6.0 million notes payable.
(c) To reflect cash payments.
(d) To reflect the retirement of all FIS equity accounts.
(e) To reflect costs related to the acquisition.
3. The unaudited pro forma statements of operations include the following
adjustments:
(a) To reflect the increase in amortization expense due to the
amortization of intangible assets over 10 years.
(b) To reflect interest expense related to the notes payable issued as
consideration for the purchase.
(c) To reflect the reduction in interest income had the cash consideration
been paid at the beginning of the year.
21
(d) Earnings per share is computed by dividing the net loss by the
weighted average number of common shares outstanding. The calculation
assumes that the 2,450,000 shares of the Company's common stock issued
in the acquisition were outstanding for the entire period. Diluted
earnings per share is the same as basic earnings per share as the
potential common stock equivalents are anti-dilutive.
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
EDGAR Online, Inc.
Dated: January 12, 2001 By: /s/ Tom Vos
-----------------------------------------
Tom Vos
President and Chief Operating Officer