-----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, ShtqB7gJg/87JoSmXKLLF9Adj6kkRD9qydtuWJkC+Lrs49a7yALsZSWpxphUPOco IdqRt3vpEtm5rEe1rMwkbg== 0001002536-97-000005.txt : 19970513 0001002536-97-000005.hdr.sgml : 19970513 ACCESSION NUMBER: 0001002536-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INDIVIDUAL INC CENTRAL INDEX KEY: 0001002536 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 043036959 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27734 FILM NUMBER: 97601146 BUSINESS ADDRESS: STREET 1: 8 NEW ENGLAND EXECUTIVE PARK WEST CITY: BURLINGTON STATE: MA ZIP: 01803 BUSINESS PHONE: 6172736000 MAIL ADDRESS: STREET 1: 8 NEW ENGLAND EXECUTIVE PK CITY: BURLINGTON STATE: MA ZIP: 01803 10-Q 1 16 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10Q (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, 1997 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: 0-27734 --------------------------------------------------- Individual, Inc_____________________________________________ - ---------------- (Exact name of registrant as specified in its charter) Delaware - -------- (State or other jurisdiction of incorporation or organization) 04-303-6959 - ------------- (I.R.S. Employer Identification No.) 8 New England Executive Park West, Burlington, MA 01803 - ------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (617) 273-6000 - --------------- (Registrant's telephone number, including area code) _________________________________________________________ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 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. __X__Yes ___No APPLICABLE ONLY TO CORPORATE ISSUERS: As of March 31, 1997, 14,638,072 shares of Common Stock, $.01 par value per share, were outstanding. Individual, Inc. Form 10-Q For the Quarter Ended March 31, 1997 Index
Page # - -------- Facing Sheet 1 Index 2 PART I - UNAUDITED FINANCIAL INFORMATION - ---------------------------------------------------------- Item 1. Consolidated Financial Statements Consolidated Balance Sheets March 31, 1997 (unaudited) and December 31, 1996 3 Consolidated Statements of Operations (unaudited) 4 Consolidated Statements of Cash Flows (unaudited) 5 Notes to Unaudited Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II - OTHER INFORMATION - ---------------------------------------------------------- Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15 Exhibit Index 16 Exhibit 11 Computation of Loss Per Share 17 Financial Data Schedule 18
Individual, INC. Consolidated BALANCE SHEETS (Unaudited)
March 31, December 31, 1997 1996 ------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 19,812,309 $ 21,886,219 Investments in marketable securities 9,151,199 8,448,306 Accounts receivable, net 7,454,227 11,088,046 Prepaid expenses 632,102 456,823 ------------- -------------- Total current assets 37,049,837 41,879,394 Property and equipment, net 4,123,554 4,102,709 Other assets, net 302,204 947,213 ------------- -------------- Total assets $ 41,475,595 $ 46,929,316 ============= ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,907,800 $ 4,718,695 Accrued royalties 1,886,608 1,610,829 Accrued expenses 5,258,155 3,821,505 Deferred revenue 12,071,483 13,706,132 Equipment financing loans and notes payable 1,073,963 1,074,055 ------------- -------------- Total current liabilities 23,198,009 24,931,216 Other long term liabilities 1,996,017 1,410,625 Stockholders' equity: Common stock, $0.01 par value; 25,000,000 shares authorized, 14,638,072 and 14,413,988 shares issued and outstanding in 1997 and issued in in 1996, respectively 146,381 144,140 Additional paid in capital 90,167,831 89,840,455 Cumulative translation adjustment 51,702 70,149 Unrealized gains on marketable securities 136,336 125,475 Accumulated deficit (74,220,681) (69,562,067) Less 32,865 shares held in treasury (at cost) at December 31, 1996 - (30,677) ------------- -------------- Total stockholders' equity 16,281,569 20,587,475 ------------- -------------- Total liabilities and stockholders' equity $ 41,475,595 $ 46,929,316 ============= ============== The accompanying notes are an integral part of the consolidated financial statements.
------ INDIVIDUAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the three months ended March 31, 1997 1996 ------------- ------------- Revenue $ 7,794,887 $ 5,029,291 Cost of revenue 4,241,915 2,257,506 ------------- ------------- Gross margin 3,552,972 2,771,785 Operating expenses: Sales and marketing 1,886,856 1,060,544 New subscriber acquisition 2,783,058 2,230,703 Product development 1,196,613 838,725 General and administrative 990,424 655,422 Acquisitions and other charges 1,632,289 - ------------- ------------- Total operating expenses 8,489,240 4,785,394 ------------- ------------- Loss from operations (4,936,268) (2,013,609) Interest income and other, net 368,419 241,594 Interest expense (90,765) (738,206) Net loss ($4,658,614) ($2,510,221) ============= ============= Net loss per common share ($0.32) ($0.25) ============= ============= Weighted average common shares outstanding 14,583,463 9,844,520 ============= ============= The accompanying notes are an integral part of the consolidated financial statements.
------ Individual, INC. Consolidated STATEMENTS OF CASH FLOWS (Unaudited)
For the three months ended March 31, 1997 1996 ------------- ------------- Cash flows from operating activities: Net loss ($4,658,614) ($2,510,221) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 689,640 449,252 Loss on disposal of property and equipment 106,196 18,728 Provision for doubtful accounts 27,750 48,632 Changes in operating assets and liabilities: Decrease in accounts receivable 3,606,069 1,104,010 Increase in prepaid expenses (175,279) (84,578) Decrease/ (Increase) in other assets 507,290 (2,020) (Decrease)/ Increase in accounts payable and accrued expenses (98,466) 12,651 Increase in other long term liabilities 166,667 - (Decrease)/ Increase in deferred revenue (1,634,650) 78,009 ------------- ------------- Net cash used in operating activities: (1,463,397) (885,537) ------------- ------------- Cash flows from investing activities: Additions to property and equipment (670,993) (115,400) Investments in marketable securities (700,000) (1,954,794) ------------- ------------- Net cash used in investing activities: (1,370,993) (2,070,194) ------------- ------------- Cash flows from financing activities: Principal repayments under lease obligations (30,592) (41,639) Increase/ (Decrease) in equipment loan, net 449,226 (159,518) Proceeds from issuance of common stock, net of related expenses 360,293 29,868,232 Payment on senior subordinated notes - (10,000,000) ------------- ------------- Net cash provided by financing activities 778,927 19,667,075 ------------- ------------- Effect of exchange rate on cash (18,447) (7,235) ------------- ------------- Net increase in cash and cash equivalents (2,073,910) 16,704,109 Cash and cash equivalents at the beginning of period 21,886,219 17,517,743 ------------- ------------- Cash and cash equivalents at the end of period $ 19,812,309 $ 34,221,852 ============= ============= Supplemental cash flow information: Interest paid $ 36,350 $ 691,665 ============= ============= Non cash transactions: Equipment acquired under capital lease obligation - 3,359 ============= ============= The accompanying notes are an integral part of the financial statements.
INDIVIDUAL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Presentation The unaudited consolidated financial statements of Individual, Inc. (the "Company") presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management's disc ussion and analysis of financial condition and results of operations, contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows of the Company and its subsidiaries. Quarterly operating results are not necessarily indicative of the results which would be expected for the full year. 2. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 3. Reclassification of Amounts Certain amounts in the financial statements for the quarter ended March 31, 1996 have been reclassified to conform to the presentation for the quarter ended March 31, 1997. 4. Per Share Computations Net loss per common share for 1996 gives effect to the conversion of all shares of Series B, C, D, E and G Redeemable Preferred Stock and Series A and F Preferred Stock and does not include the dividends on Redeemable Preferred Stock as an increase in net loss. Pursuant to the requirements of the Securities and Exchange Commission, common shares and common equivalent shares issued at prices below the IPO price of $14.00 per share during the twelve months immediately preceding the date of the initial filing of the Registration Statement have been included in the calculation of common shares and common share equivalents, using the treasury stock method, as if they were outstanding for all periods prior to the IPO. 5. Acquisitions and Other Charges All operating expenses of FreeLoader of approximately $1.5 million, which are predominantly product development expenses, are reflected in acquisitions and other charges, as well as the amortization of goodwill acquired in the purchase of the Hoover business of approximately $178,000. On February 6, 1997, the Company announced that it is planning to sell FreeLoader or seek a majority investor. In order to maintain the viability and value of FreeLoader, the Company is maintaining its current level of investment in the FreeLoader operations as it pursues a sale or outside investment. No material impact is expected from the sale of FreeLoader, as the majority of the purchase price has been allocated to purchased incomplete technology and accordingly, was expensed at the time of the purchase. However, there can be no assurance that the Company will be successful in completing such a transaction, which may require the Company to cease operations of FreeLoader and incur additional expenses related to any termination of operations. INDIVIDUAL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6. Commitments and Contingencies The Company has been named as a defendant in a putative federal securities class action lawsuit filed on November 13, 1996 in the United States District Court for the District of Massachusetts. The lawsuit was filed on behalf of an alleged class of purchasers of the Company's common stock during the period from March 15, 1996 through July 24, 1996. The complaint filed in the lawsuit also names as defendants, among others, certain of the Company's current and former directors and officers, including Joseph A. Amram, the Company's former Chief Executive Officer, as well as the three co-managing underwriters of the Company's IPO. The complaint alleges, among other things, that the defendants made misstatements, or failed to make statements, to the investing public in the IPO Prospectus, Registration Statement, as well as in subsequent public disclosures, relating to the alleged existence of disputes between Joseph A. Amram and the Company. The plaintiffs seek damages, including costs and expenses, in an unspecified amount, among other relief. The Company believes that the allegations contained in the complaint are without merit and intends to defend vigorously against all such claims. The ultimate claims payable under these actions, if any, are neither probable nor estimable. 7. Recently Issued Accounting Standard The Financial Accounting Standards Board issued Statement No. 128 ("SFAS 128"), "Earnings per Share", which modifies the way in which earnings per share (EPS) is calculated and disclosed. Upon adoption of this standard for the fiscal period ending December 31, 1997, the Company will disclose basic and diluted EPS and will restate all prior period EPS data presented. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS, similar to fully diluted EPS, reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the isssuance of common stock that then shared in the earnings of the entity. Management believes the adoption of SFAS 128 will not have a material impact on reported earnings per share. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Individual offers a suite of customized information services that provide knowledge workers with relevant current awareness reports each day while offering information providers and advertisers new ways to reach targeted audiences. The Company commenced delivery of its initial service in early 1990, and has subsequently introduced additional services targeted at multiple market segments. The Company's revenue is derived from two classes of services: enterprise services and single-user services. Revenue for the Company's principal enterprise service, First! (introduced in the first quarter of 1990) consists of subscription fees from organizations. In addition, in October 1996, the Company acquired the Hoover business intelligence unit ("Hoover"), from the Information Access Company ("IAC"), a unit of the Thompson Corporation. Revenue from the enterprise Hoover service consists of both subscription fees for content, and software license and maintenance fees. The Company's principal single-user service is the World Wide Web-based service NewsPage, introduced in the second quarter of 1995. NewsPage base service is generally available for no charge to users. Revenue consists of advertising fees from companies placing advertisements through this service and from subscription fees for premium levels of service and fees for the fulfillment of certain user requests for additional information. Another single-user service of the Company is HeadsUp, which was introduced in the second quarter of 1993. HeadsUp consists of subscription fees and fees for the fulfillment of certain user requests for additional information. HeadsUp is a fax and email-based service and is not being promoted actively in 1997, primarily due to the Company's belief that users are moving to Web-based information services, such as NewsPage. The Company recognizes subscription revenue ratably over the subscription period. The Company's subscription contracts are typically billed in advance, and amounts attributable to services not yet delivered are recorded in deferred revenue. Customers of the Company's services may, under certain circumstances, terminate their subscriptions at any time and receive a credit in the form of a cash refund for the unused portion. Historically, the level of subscription cancellations prior to the termination of the subscription period has not been material and has had no impact on revenue previously recognized. Fulfillment fees are recognized as revenue at the time stories are provided. Advertising revenue is recognized ratably over the advertisement period. The majority of the Company's operating expenses consists of salaries and related costs. The Company had 220 full-time employees on March 31,1997 up from 214 on December 31, 1996, and up from 157 and 96 on December 31, 1995 and 1994, respectively. The number on March 31, 1997 includes 38 employees working at Freeloader. The Company incurs significant expenses to acquire new customers, reported as new subscriber acquisition expenses. The Company may also incur expenses in the process of soliciting a subscription renewal, which are included in sales and marketing expenses. The cost of soliciting subscription renewals is substantially less than the cost of acquiring new subscriptions. General Risk Factors That May Affect Future Quarterly Results - --------------------------------------------------------------------- This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties. The Company's actual future results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in "Factors That May Affect Future Performance" under Item 7 of the Company's Annual Report on Form 10K for the fiscal year ended December 31, 1996 as well as other factors described from time to time in the Company's filings with the Securities and Exchange Commission. The market for current awareness products is experiencing rapid changes as organizations introduce company-wide information and knowledge solutions built on enterprise computing platforms such as internal intranets and groupware products, such as Lotus Notes. As a result of these changes, Individual has migrated its First! product from fax and e-mail distribution, sold primarily to small groups of users at an average annual contract value of less than $10,000, to distribution via intranet and Lotus Notes systems capable of servicing large organizations. This evolving market focus has required the Company not only to invest in the product development and engineering required to introduce new and enhanced enterprise-based products such as First! Intranet and First! Notes, but also to adapt its selling efforts in order to address the requirements of large organizations that desire to implement current business awareness solutions on an enterprise-wide basis over their existing information infrastructures. Such solutions typically involve large contracts with annual contract values in excess of $50,000 and generally require a longer sales cycle than departmental or business-group sales. As a result, the Company believes that it must invest in additional sales and sales management personnel with experience in selling large contracts, as well as in additional customer service personnel capable of addressing increasingly complex customer needs. Approximately 75% of the Company's enterprise customer base presently distributes the Company's products from intranets and Lotus Notes, almost double from a year ago. Notwithstanding such growth, however, the ability of the Company to achieve future growth is heavily dependent on the Company's ability to successfully continue to sell large contracts to enterprise customers and to support implementations with those customers. There can be no assurance that the Company will be successful in recruiting and training additional sales and customer service personnel with the skills required to sell and support large contracts, or that the sales cycles will not extend beyond the periods currently experienced by the Company. If the Company fails to successfully recruit and train such personnel, or if the Company experiences longer sales cycles, its rate of growth and future operating results may be adversely affected. On June 28, 1996, the Company acquired FreeLoader, a developer of agent-based software for the off-line delivery of World Wide Web multi-media content. On February 6, 1997, the Company announced that it is planning to sell FreeLoader or seek a majority investor. This decision was based on the rapid changes in the market for Web broadcasting which have occurred since the closing of the FreeLoader acquisition, including the significant increase in the number of vendors offering products based on "push" technologies and the desire for the Company to offer its services on a wide range of Web broadcasting platforms, as well as the future need to invest heavily in FreeLoader in order to maintain the competitiveness of its product offerings. In order to maintain the viability and value of FreeLoader, the Company is maintaining its current level of investment in the FreeLoader operations as it pursues a sale or outside investment. No material impact is expected from the sale of FreeLoader, as the majority of the purchase price has been allocated to purchased incomplete technology and accordingly, was expensed at the time of the purchase. However, there can be no assurance that the Company will be successful in completing such a transaction, which may require the Company to cease operations of FreeLoader and incur additional expenses related to any termination of operations. Management may in future periods consider other acquisitions that it believes may enable Individual to acquire complementary skills and capabilities, offer new products and services, expand its customer base, or obtain other competitive advantages. Such acquisitions involve potential risks, including difficulties in assimilating the acquired Company's operations, technology, products and personnel, completing and integrating acquired in-process technology, diverting management's resources, uncertainties associated with operating in new markets and working with new employees and customers, and the potential loss of the acquired Company's key employees. The Company depends, in significant part, upon the continued services of its key technical, editorial, sales and product development, most of whom are not bound by employment agreements, and only certain of whom are bound by noncompetition agreements. The Company's plan requires the hiring of additional engineering and sales personnel in order to add additional products and features and grow its customer base. In the Boston market, these skills are in high demand and there is no assurance that the Company will be successful in hiring these personnel. In view of the Company's revenue growth in recent years and its limited operating history, period-to-period comparisons of its financial results are not necessarily meaningful and should not be relied upon as any indication of future performance. The Company's quarterly results of operations have fluctuated significantly in the past and will likely fluctuate in the future due to, among other factors, demand for its services and changes in service mix, the size and timing of new and renewal subscriptions from corporate customers, advertising revenue levels, the effect of new service announcements by the Company and its competitors, the ability of the Company to develop, market and introduce new and enhanced versions of its services on a timely basis and the level of product and price competition. A substantial portion of the Company's cost of revenue, which consists principally of fees payable to information providers , telecommunication costs and personnel expenses, is relatively fixed in nature. The Company's operating expense levels are based, in significant part, on the Company's expectations of future revenue. If quarterly revenues are below management's expectations, both gross margins and results of operations would be adversely affected because a relatively small amount of the Company's costs and expenses varies with its revenue in the short-term. - ------ Results of Operations - ----------------------- The following table sets forth, for the periods indicated, certain financial data as a percentage of total revenue:
Three months ended March 31, 1997 1996 Revenue 100% 100% Cost of Revenue 54% 45% ------- ------- Gross Margin 46% 55% Operating expenses: Sales and marketing 24% 21% New subscriber acquisition 36% 44% Product development 15% 17% General and administrative 13% 13% Acquisitions and other charges 21% - ------- ------- Total operating expense 109% 95% Loss from operations (63)% (40)% Interest and other income (expense), net 3% (10)% ------- ------- Net loss (60)% (50)% ======== =====
Three months ended March 31, 1997 and 1996 - ------------------------------------------------- Revenue. Revenue increased 55% from $5,029,000 for the three months ended March 31, 1996 to $7,795,000 for the three months ended March 31, 1996. Additionally, the number of registered and authorized users of the Company's information services increased to more than 558,000 at March 31, 1996, or 300% over the number of users at March 31, 1996. In the first quarter of fiscal 1997, revenue from enterprise services was $5,374,000, up from $3,465,000 for the same period in 1996. This increase of 55% in revenue from enterprise services resulted primarily from new sales of enterprise solutions, primarily First! Intranet and First! Notes, which is offsetting declining revenues from First! distributed by fax and e-mail. Revenue from Hoover, acquired in October 1996, also contributed to the increase. In the first quarter of fiscal 1997, revenue from single user services also grew by 55% to $2,421,000, up from $1,565,000 for the same period in 1996. The growth was attributable primarily to the Company's NewsPage service on the World Wide Web. The increase in revenue from NewsPage was partially offset by the declining revenues of the non-Web single user service HeadsUp, which has not been actively promoted. The Company expects this trend to continue in the future. Cost of revenue. Cost of revenue was $4,242,000 for the three months ended March 31, 1997, as compared to $2,258,000 for the same period in 1996, or an increase of 88%. The increase was the result of additional costs attributable to the increased revenue. Gross margin decreased from 55% to 46%. The decline in gross margin is the result of higher information provider costs, including minimum royalties paid to certain information provider and the higher royalty percentage paid on NewsPage and Hoover revenue as compared to revenue from First! Further, the Company incurred additional costs from adding capacity for NewsPage and customer support costs required to support the larger customer base. Sales and marketing. Sales and marketing expenses increased 78% to $1,887,000 for the three months ended March 31, 1997, up from $1,061,000 for the same period of 1996. This increase was primarily due to additional personnel and consulting services in marketing, product management and advertising sales for NewsPage. Additionally, due to the larger customer base there was an increase in expenses related to renewing First! contracts. New subscriber acquisition. New subscriber acquisition expenses increased 25% to $2,783,000 for the three months ended March 31, 1997 from $2,231,000 for the same period in 1996. The increase in new subscriber acquisition expenses in the first quarter of 1997 was the result of additional sales personnel selling First! and expenses to acquire NewsPage users, primarily Web site advertising and commissions paid to NewsPage distribution partners. The Company plans to add additional direct sales personnel and to continue its expenditures in promoting NewsPage at the current or higher levels if it determines that the promotional activities continue to generate increases in NewsPage users. Product development. Product development increased 43% to $1,197,000 for the three months ended March 31, 1997, up from $839,000 for the same period in 1996. This increase was primarily the result of development expenses related to the continued development of new enhancements for both the NewsPage and enterprise services. The Company had anticipated a higher level of expenditures in the quarter but due to challenges in recruiting qualified engineers in the Boston market, engineers were not added as quickly as the Company had planned. The Company intends to add additional engineers throughout 1997. General and administrative. General and administrative expenses increased 51% to $990,000 for the three months ended March 31, 1997, up from $655,000 for the same period of 1996. The reasons for this increase included the hiring of additional management and administrative personnel and other expenses related to the requirements of a public company. Acquisitions and other charges. Acquisitions and related charges were $1,632,000 for the quarter ended March 31, 1997. These charges primarily include development expenses related to Freeloader, acquired in June 1996. As described above, the Company announced in February 1997 that it is planning to sell FreeLoader or seek a majority investor. Interest income and other, net. Interest income and other, net increased 52% to $368,000 for the three months ended March 31, 1997, up from $242,000 for the same period of 1996, primarily from interest earned on the net proceeds of the March 1996 IPO. Interest expense. Interest expense decreased to $91,000 for the three months ended March 31, 1997, down from $738,000 for the same period of 1996. The decrease was due to the interest charges on senior subordinated notes incurred in the first quarter of 1996. The senior subordinated notes were paid in full in March 1996 from a portion of the proceeds of the IPO. Liquidity and Capital Resources - ---------------------------------- The Company's cash, cash equivalents and marketable securities balance at March 31, 1997 was $28,964,000, as compared to $30,335,000 at December 31, 1996. Net cash used in operations was ($1,463,000) for the three months ended March 31, 1997, as compared with ($886,000) for the same period in 1996. The change was mainly attributable to the increased operating expenses in the three month period ended March 31, 1997. The first quarter, due to the higher level of billings in the fourth quarter which are substantially collected in the first quarter, tends to have a lower cash usage than other quarters. The Company expects that its use of cash from operations in future quarters will be greater than levels experienced in the first quarter. Net cash used in investing activities was ($1,371,000) in the three months ended March 31, 1997 as compared with ($2,070,000) for the same period of 1996. In the first quarter of 1997, $700,000 was used to purchase marketable securities, primarily from U.S. government agencies, down from $1,955,000 used during the same period a year ago. Net cash provided by financing activities was $779,000 for the three months ended March 31 1997, as compared to $19,667,000 in the same period of 1996. This decrease resulted primarily from the completion of the Company's IPO in March of 1996. The Company has also used equipment leases and debt instruments to finance the majority of its purchases of capital equipment. At March 31, 1997, the Company had approximately $1,074,000 outstanding in connection with these obligations and had an additional $1,516,000 available under established credit arrangements. In addition, the Company has a revolving line of credit with a commercial bank providing for a maximum credit of $3,500,000 subject to certain covenants. At March 31, 1997, no amounts were outstanding under this line. Management believes that cash and marketable securities and cash flow from operations will be sufficient to fund its operations at least for the next twelve months. This may depend on numerous factors, including the rate of expansion for current products and services, the development of new products and services, and potential acquisitions or strategic investments. Recently Issued Accounting Standard - -------------------------------------- The Financial Accounting Standards Board issued Statement No. 128 ("SFAS 128"), "Earnings per Share", which modifies the way in which earnings per share (EPS) is calculated and disclosed. Upon adoption of this standard for the fiscal period ending December 31, 1997, the Company will disclose basic and diluted EPS and will restate all prior period EPS data presented. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS, similar to fully diluted EPS, reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the isssuance of common stock that then shared in the earnings of the entity. Management believes the adoption of SFAS 128 will not have a material impact on reported earnings per share. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K - -------- ------------------------------------- (a) Exhibits 11 Computation of Weighted Average Shares Used in Computing Loss Per Share Amounts Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended March 31, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Individual, Inc. Date: May 13, 1997 By: /s/Michael Kolowich -------------------- Michael Kolowich Chariman of the Board, President, Chief Executive Officer and Director (Principal Executive Officer) By: /s/Robert L. Lentz -------------------- Robert L. Lentz Senior Vice President, Finance and Administration, Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer and Principal Accounting Officer) EXHIBIT INDEX INDIVIDUAL, INC.
Exhibit Number Description Page - -------------- -------------------------------------------- ---- 11 Computation of Weighted Average Shares 17 Used in Computing Loss Per Share Amounts Financial Data Schedule 18
EX-11 2 COMPUTATION OF EPS 17
Exhibit 11 INDIVIDUAL, INC. COMPUTATION OF WEIGHTED AVERAGE SHARES USED IN COMPUTING LOSS PER SHARE AMOUNTS Primary Fully Diluted Supplemental Type of Security Shares Shares Shares (1) - ------------------------------------------------------------------ ----------- -------------- ------------- FOR THE THREE MONTHS ENDED MARCH 31, 1996: Common stock less shares held in treasury, beginning of period 1,713,096 1,713,096 1,713,096 Weighted average common stock issued during the period 506,690 506,690 506,690 Weighted average treasury stock repurchased during the period (476) (476) (476) Conversion of preferred stock and redeemable preferred stock into common stock (1) 921,729 921,729 7,625,210 ----------- -------------- ------------- Weighted average shares of common stock outstanding 3,141,039 3,141,039 9,844,520 =========== ============== ============= Net loss per common share ($0.95) ($0.95) ($0.25) =========== ============== ============= FOR THE THREE MONTHS ENDED MARCH 31, 1997: Common stock less shares held in treasury, beginning of period 14,413,988 14,413,988 14,413,988 Weighted average common stock issued during the period 169,475 169,475 169,475 Weighted average shares of common stock outstanding 14,583,463 14,583,463 14,583,463 =========== ============== ============= Net loss per common share ($0.32) ($0.32) ($0.32) =========== ============== ============= (1) Upon completion of the public offering on March 20, 1996, the redeemable preferred stock and preferred stock converted to 7,625,210 shares of common stock. Accordingly, the supplemental earnings per share calculation has assumed the conversion of all shares of redeemable preferred stock and preferred stock, effected for the 3-for-2 split, at the beginning of each period presented.
EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED BALANCE SHEET AT DECEMBER 28, 1996, AND CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 28,1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 19,812 9,151 7,454 0 0 37,050 4,124 0 41,476 23,198 0 146 0 0 16,135 41,476 0 7,795 4,242 8,489 0 0 91 (4,659) 0 (4,659) 0 0 0 (4,659) (.32) (.32)
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