SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR QUARTER ENDED June 30, 2002

Commission File Number: 0-31226

INVESTOOLS INC.

(Exact name of Registrant as specified in its charter)

Delaware		76-0685039
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5959 Corporate Drive, Suite LL250 Houston, Texas		77036
(Address of principal executive offices)	7	(Zip Code)

Registrant’s telephone number, including area code:

(281) 588-9700

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 and 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.

Yes ý No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

$.01 par value per share Common Stock: 42,422,871 as of August 2, 2002

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

INVESTOOLS INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except per share amounts)

	June 30, 2002			December 31, 2001
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	3,856		$	6,281
Accounts receivable, net (allowance: $167; 150)	1,639			1,560
Amounts due from related parties	—			15
Income tax receivable	591			746
Other current assets	566			407
Total current assets	6,652			9,009
Goodwill and intangibles, net	12,420			40,945
Deferred tax assets	4,843			4,799
Furniture, fixtures and equipment, net	981			436
Total assets	$	24,896		$	55,189

LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	2,667		$	3,787
Deferred revenue	4,418			3,616
Accrued payroll	1,779			867
Accrued tax liabilities	572			705
Shares subject to rescission	—			366
Other current liabilities	841			1,502
Total liabilities, current	10,277			10,843

Minority interest liability	29			2

Stockholders’ equity:
Convertible preferred stock (liquidation preference $25 per share) (shares issued and outstanding 0, 120)	—			1
Common stock (shares issued and outstanding: 42,423; 40,792)	424			408
Additional paid-in capital	126,118			125,855
Deferred compensation	(111		)	—
Accumulated deficit	(111,841		)	(81,920		)
Total stockholders’ equity	14,590			44,344
Total liabilities and stockholders’ equity	$	24,896		$	55,189

The accompanying notes are an integral part of these consolidated financial statements.

INVESTOOLS INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2002			2001			2002			2001
Revenue	$	14,466		$	15,541		$	27,886		$	29,774

Costs and expenses
Cost of revenue	6,631			6,684			12,793			12,250
Selling, general and administrative expenses	6,742			5,377			13,765			11,518
Related party expense	1,688			1,205			2,730			3,393
Depreciation and amortization expense	167			1,160			236			2,322
Write down of assets and other charges	—			271			—			475
Total costs and expenses	15,228			14,697			29,524			29,958
Net income (loss) from operations	(762		)	844			(1,638		)	(184		)

Other income (expense)
Gain on sale of assets	—			(50		)	1			(41		)
Interest income and other, net	(47		)	(70		)	(28		)	(121		)
Total other income (expense)	(47		)	(120		)	(27		)	(162		)

Net income (loss) before minority interest, income taxes, and discontinued operations	(809		)	724			(1,665		)	(346		)
Minority interest (income) expense	29			—			27			—
Income tax expense	—			654			—			677