UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE
ACT OF 1934
FOR
THE QUARTERLY PERIOD ENDED: MARCH 31, 2005
OR
o 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: 0-26071
EDGAR
ONLINE, INC.
(EXACT
NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
|
DELAWARE |
|
06-1447017 |
|
STATE
OR OTHER JURISDICTION OF |
|
(I.R.S.
EMPLOYER IDENTIFICATION NO.) |
|
INCORPORATIONOR
ORGANIZATION |
|
|
| |
|
|
50
WASHINGTON ST., NORWALK, CT 06854
(ADDRESS
OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(203)
852-5666
(REGISTRANT'S
TELEPHONE NUMBER, INCLUDING AREA CODE)
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. YES x NOo
Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). YES o NO x
Number of
shares of common stock outstanding at May 9, 2005: 24,920,087 shares
EDGAR
ONLINE, INC.
FORM
10-Q
FOR
THE QUARTERS ENDED MARCH 31, 2005 AND 2004
INDEX
| PART I. FINANCIAL INFORMATION |
Page No. |
| |
|
| ITEM 1. Financial
Statements |
|
| |
|
|
Consolidated
Balance Sheets |
|
|
March
31, 2005 (unaudited) and December 31, 2004 |
3 |
| |
|
|
Condensed
Consolidated Statements of Operations |
|
|
Three
Months Ended March 31, 2005 and 2004 (unaudited) |
4 |
| |
|
|
Condensed
Consolidated Statements of Cash Flows |
|
|
Three
Months Ended March 31, 2005 and 2004 (unaudited) |
5 |
| |
|
|
Notes
to Condensed Consolidated Financial Statements (unaudited) |
6 |
| |
|
|
ITEM
2. Management's Discussion and Analysis of Financial Condition and Results
of Operations |
7 |
| |
|
|
ITEM
3. Quantitative and Qualitative Disclosures About Market
Risk |
15 |
| |
|
|
ITEM
4. Controls and Procedures |
16 |
| |
|
|
PART
II. OTHER INFORMATION |
|
| |
|
|
ITEM
1. Legal Proceedings |
|
| |
|
|
ITEM
2. Unregistered Sales of Equity Securities and Use of
Proceeds |
|
| |
|
|
ITEM
3. Defaults Upon Senior Securities |
|
| |
|
|
ITEM
4. Submission of Matters to a Vote of Security Holders |
|
| |
|
|
ITEM
5. Other Information |
|
| |
|
|
ITEM
6. Exhibits |
|
| |
|
|
Signatures |
17 |
PART 1. FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS.
EDGAR
ONLINE, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(IN
THOUSANDS, EXCEPT SHARE DATA)
| |
|
March
31, 2005 (unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
| |
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
2,025 |
|
$ |
2,678 |
|
|
Short
term investments |
|
|
2,000 |
|
|
2,000 |
|
|
Accounts
receivable, less allowance of $327 and $474, respectively |
|
|
2,567 |
|
|
1,895 |
|
|
Other
current assets |
|
|
332 |
|
|
329 |
|
|
Total
current assets |
|
|
6,924 |
|
|
6,902 |
|
| |
|
|
|
|
|
|
|
|
Property
and equipment, net |
|
|
1,114 |
|
|
1,138 |
|
|
Goodwill |
|
|
2,189 |
|
|
2,189 |
|
|
Other
intangible assets, net |
|
|
7,624 |
|
|
7,936 |
|
|
Other
assets |
|
|
667 |
|
|
441 |
|
|
Total
assets |
|
$ |
18,518 |
|
$ |
18,606 |
|
| |
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses |
|
$ |
1,274 |
|
$ |
1,612 |
|
|
Deferred
revenues |
|
|
3,075 |
|
|
2,581 |
|
|
Total
current liabilities |
|
|
4,349 |
|
|
4,193 |
|
| |
|
|
|
|
|
|
|
|
Stockholders'
equity: |
|
|
|
|
|
|
|
|
Common
stock, $0.01 par value, 50,000,000 shares authorized, |
|
|
|
|
|
|
|
|
23,104,460
shares issued and 21,934,510 shares outstanding at |
|
|
|
|
|
|
|
|
March
31, 2005 and 22,640,366 shares issued and 21,470,416 |
|
|
|
|
|
|
|
|
shares
outstanding at December 31, 2004 |
|
|
231 |
|
|
226 |
|
|
Preferred
stock, $0.01 par value, 1,000,000 shares authorized, no
shares |
|
|
|
|
|
|
|
|
issued
or outstanding |
|
|
-- |
|
|
-- |
|
|
Additional
paid-in capital |
|
|
63,073 |
|
|
62,378 |
|
|
Accumulated
deficit |
|
|
(47,254 |
) |
|
(46,310 |
) |
|
Less:
Treasury stock, at cost, 1,169,950 shares at March 31,
2005 |
|
|
|
|
|
|
|
|
and
December 31, 2004 |
|
|
(1,881 |
) |
|
(1,881 |
) |
|
Total
stockholders' equity |
|
|
14,169 |
|
|
14,413 |
|
|
Total
liabilities and stockholders' equity |
|
$ |
18,518 |
|
$ |
18,606 |
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
See
accompanying notes to condensed consolidated financial statements.
EDGAR ONLINE, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN
THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
| |
|
Three
Months Ended
March
31, |
|
|
Revenues: |
|
2005 |
|
2004 |
|
|
Seat-based
subscriptions |
|
$ |
1,899 |
|
$ |
1,605 |
|
|
Data
sales |
|
|
1,241 |
|
|
1,162 |
|
|
Technical
services |
|
|
230 |
|
|
206 |
|
|
Advertising
and e-commerce |
|
|
133 |
|
|
173 |
|
|
Total
revenues |
|
|
3,503 |
|
|
3,146 |
|
|
Cost
of revenues |
|
|
494 |
|
|
485 |
|
| |
|
Gross
profit |
|
|
3,009 |
|
|
2,661 |
|
| |
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Sales
and marketing |
|
|
963 |
|
|
625 |
|
|
Development
expenses |
|
|
548 |
|
|
393 |
|
|
General
and administrative |
|
|
1,982 |
|
|
1,910 |
|
|
Depreciation
and amortization |
|
|
476 |
|
|
596 |
|
|
|
|
|
3,969 |
|
|
3,524 |
|
| |
|
|
|
|
|
|
|
|
Loss
from operations |
|
|
(960 |
) |
|
(863 |
) |
| |
|
|
|
|
|
|
|
|
Interest
and other income (expense), net |
|
|
16 |
|
|
2 |
|
| |
|
Net
loss |
|
$ |
(944 |
) |
$ |
(861 |
) |
| |
Weighted
average shares outstanding - basic and
diluted |
|
|
21,568 |
|
|
16,992 |
|
|
Loss
per share - basic and diluted |
|
$ |
(0.04 |
) |
$ |
(0.05 |
) |
See
accompanying notes to condensed consolidated financial statements.
EDGAR ONLINE, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN
THOUSANDS)
(UNAUDITED)
| |
|
Three Months Ended
March 31, |
|
| |
|
2005 |
|
2004 |
|
|
Cash
flows from operating activities: |
|
|
|
|
|
|
Net
loss |
|
$ |
(944 |
) |
$ |
(861 |
) |
|
Adjustments
to reconcile net loss to net cash |
|
|
|
|
|
|
|
|
(used
in) operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
164 |
|
|
178 |
|
|
Amortization
of intangibles |
|
|
312 |
|
|
418 |
|
|
Provision
for (recovery of) losses on trade accounts receivable |
|
|
(147 |
) |
|
30 |
|
|
Changes
in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
(525 |
) |
|
(347 |
) |
|
Other
assets, net |
|
|
(230 |
) |
|
(33 |
) |
|
Accounts
payable and accrued expenses |
|
|
(338 |
) |
|
(139 |
) |
|
Deferred
revenues |
|
|
494 |
|
|
278 |
|
|
Accrued
interest |
|
|
-- |
|
|
(26 |
) |
|
Long
term payables |
|
|
-- |
|
|
(21 |
) |
| |
|
Total
adjustments |
|
|
(270 |
) |
|
338 |
|
|
Net
cash used in operating activities |
|
|
(1,214 |
) |
|
(523 |
) |
| |
|
Cash
used in investing activities: |
|
|
|
|
|
|
|
|
Purchases
of property and equipment |
|
|
(140 |
) |
|
(78 |
) |
|
Net
cash used in investing activities |
|
|
(140 |
) |
|
(78 |
) |
| |
|
Cash
flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds
from exercise of stock options and warrants |
|
|
701 |
|
|
-- |
|
|
Principal
payments on notes payable |
|
|
-- |
|
|
(1,900 |
) |
|
Net
cash provided by/ (used in) financing activities |
|
|
701 |
|
|
(1,900 |
) |
| |
|
Net
change in cash and cash equivalents |
|
|
(653 |
) |
|
(2,501 |
) |
|
Cash
and cash equivalents at beginning of period |
|
|
2,678 |
|
|
3,860 |
|
| |
|
Cash
and cash equivalents at end of period |
|
$ |
2,025 |
|
$ |
1,359 |
|
| |
|
Supplemental
disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Cash
paid for interest |
|
$ |
-- |
|
$ |
26 |
|
See
accompanying notes to condensed consolidated financial statements.
EDGAR
ONLINE, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in
thousands, except share and per share data)
(UNAUDITED)
(1) BASIS
OF PRESENTATION
EDGAR
Online, Inc. (the "Company"), was incorporated in the State of Delaware in
November 1995, launched its EDGAR Online Internet Web site in January 1996 and
went public in May 1999. The
Company is a leading provider of value-added business and financial information
on global companies to financial, corporate and advisory
professionals.
The
unaudited interim financial statements of the Company as of March 31, 2005 and
for the three months ended March 31, 2005 and 2004 included herein, have been
prepared in accordance with the instructions for Form 10-Q under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Article 10 of
Regulation S-X under the Exchange Act. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted pursuant to such rules and regulations relating to interim
financial statements.
In the
opinion of the Company, the accompanying unaudited interim financial statements
reflect all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of the Company as of March
31, 2005, the results of its operations and its cash flows for the three months
ended March 31, 2005 and 2004. The results for the three months ended March 31,
2005 are not necessarily indicative of the expected results for the full 2005
fiscal year or any future period.
These
financial statements should be read in conjunction with the financial statements
and related footnotes included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2004, filed with the SEC in March 2005.
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the Company 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. Significant
estimates embedded in the condensed consolidated financial statements for the
periods presented concern the allowance for doubtful accounts, the fair values
of goodwill and other intangible assets and the estimated useful lives of
intangible assets.
(2) LOSS
PER SHARE
Basic loss
per share excludes dilution for common stock equivalents and is computed by
dividing net loss available to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects, in
periods in which they have a dilutive effect, the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted and resulted in the issuance of common stock.
Diluted
loss per share is the same as basic loss per share amounts, as the outstanding
stock options and warrants are anti-dilutive for each of the periods presented.
At March
31, 2005 and 2004, the number of options outstanding were 3,127,327 and
2,731,160, respectively. At March 31, 2005 and 2004, the number of warrants
outstanding were 3,711,956 and 742,499, respectively.
(3) STOCK
BASED TRANSACTIONS
The
Company accounts for stock-based transactions in accordance with 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 Accounting Principles Board
(APB) No. 25, "Accounting for Stock Issued to Employees" (APB 25), and comply
with the disclosure provisions of SFAS 123. Under APB 25, compensation cost is
recognized 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.
Had the
Company determined compensation expense based on the fair value of the option on
the grant date under SFAS No. 123, the Company's results of operations for the
three months ended March 31, 2005 and 2004 would have been as follows:
| |
|
|
Three Months Ended March 31, |
|
| |
|
|
2005 |
|
|
2004 |
|
|
Net
loss - as reported |
|
$ |
(944 |
) |
$ |
(861 |
) |
|
Compensation
expense related to options- fair value method |
|
|
(168 |
) |
|
(228 |
) |
| |
|
Net
loss - pro forma |
|
$ |
(1,112 |
) |
$ |
(1,089 |
) |
| |
|
Basic
and diluted net loss per share - as reported |
|
$ |
(0.04 |
) |
$ |
(0.05 |
) |
|
Basic
and diluted net loss per share - pro forma |
|
$ |
(0.05 |
) |
$ |
(0.06 |
) |
(4) SALE
OF COMMON STOCK AND WARRANTS
In May
2004, the Company sold 2,500,000 units for $2.00 per unit in a public offering.
Each unit consisted of two shares of common stock and one warrant to purchase
one share of the Company's common stock. An additional 375,000 units were sold
to cover over-allotments. Of the 750,000 shares included in these units, 300,000
were offered by a selling stockholder and no related proceeds were received by
the Company. The Company also issued a warrant to purchase 250,000 units for a
price of $2.40 per unit to the underwriter of the offering. Net proceeds of
$4,100 were received by the Company in connection with this sale. Prior to the
redemption described below, the warrants included in the units had an exercise
price of $1.50 and were exercisable until May 29, 2009. Beginning November 26,
2004, the Company had the right to redeem some or all of the warrants at a price
of $0.25 per warrant at anytime after the closing price for the Company's stock
equaled or exceeded $2.00 per share for any five consecutive trading days by
giving certain notice to the then warrant holders.
In March
2005, the Company exercised its redemption right by sending notices
of redemption to holders of all of its outstanding public warrants. Pursuant to
the redemption notice, holders of the public warrants were given the opportunity
to exercise their warrants until the close of business on April 28, 2005. After
April 28, 2005, the Company would redeem any unexercised public warrants at a
price of $0.25 per warrant. As a result, 360,675 warrants were exercised in
March 2005 resulting in gross proceeds of $541 and 2,455,146 warrants were
exercised in April 2005 resulting in gross proceeds of $3,683. The Company paid
$15 to redeem 59,179 warrants which were not exercised during the redemption
period. In addition, the underwriter exercised their warrant in a cashless
transaction which resulted in 495,431 shares being issued in April 2005. At May
9, 2005, the number of shares outstanding is 24,920,087.
(5)
RECENT ACCOUNTING PRONOUNCEMENTS
In
December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment”
(SFAS 123(R)) which establishes accounting standards for all transactions
in which an entity exchanges its equity instruments for goods and services.
SFAS 123(R) revises SFAS No. 123, “Accounting for Stock-Based
Compensation”, supersedes Accounting Principles Board Opinion No. 25,
“Accounting for Stock Issued to Employees” and amends Financial Accounting
Standard No. 95, “Statement of Cash Flows”. SFAS No. 123(R) generally
requires the Company to measure the cost of employee services received in
exchange for an award of equity instruments based on the fair value of the award
on the date of the grant. The standard requires the fair value on the grant date
to be estimated using either an option-pricing model which is consistent with
the terms of the award or a market observed price, if such a price exists. The
resulting cost must be recognized over the period during which an employee is
required to provide service in exchange for the award, which is usually the
vesting period. In April 2005, the SEC deferred the effective date for SFAS 123
(R) to the beginning of the first fiscal year that begins after June 15, 2005.
The Company expects to adopt SFAS 123(R) on the effective date, and expects
the adoption to have a material impact on its net income and earnings per share.
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
We are a
leading provider of value-added business and financial information on global
companies to financial, corporate and advisory professionals . We launched our
EDGAR Online website in January 1996 and began selling our subscription services
and establishing contractual relationships with business and financial
information websites to supply EDGAR content. Our primary focus was generating
sales leads and building brand recognition.
We went
public in May 1999. In September 1999, we acquired all of the outstanding equity
of Partes Corporation, owner of the Freeedgar.com website ("FreeEDGAR"),
for $9.9 million. The purchase price consisted of the issuance of common stock,
stock options and warrants, the assumption of liabilities and acquisition
related expenses. In October 2000, we acquired all the outstanding equity of
Financial Insight Systems, Inc. ("FIS") for approximately $28.1 million. The
purchase price included the issuance of common stock, a cash payment, issuance
of notes and acquisition related expenses.
We are
continuing to focus on growing our subscription revenues and corporate data
sales and expect to generate positive cash flow from operations by offering the
following products and services:
Subscription
Services. Our subscription services include EDGAR Online Pro, EDGAR Online
Access, and our new I-Metrix suite of products. EDGAR Online Pro is sold by our
sales force and is available via multi-seat and enterprise-wide contracts. Sales
leads are primarily provided from the traffic to our subscription websites from
Yahoo! Finance and from the migration of users from EDGAR Online Access. The
price of a new subscription is $100 per month or $1,200 per year. Additional
fees are applied when the customer requests additional, specific content such as
conference call transcripts and global annual and interim reports. Our retail
product is EDGAR Online Access which has fewer features than EDGAR Online Pro.
This product is available for $220 per year and is purchased annually or
quarterly in advance with a credit card. The
I-Metrix suite of products, which were launched in the second quarter of 2005,
are designed solely for analyzing documents that have been formatted in XBRL and
for use exclusively with the Microsoft Office System. Revenue
from subscription services is recognized ratably over the subscription period,
which is typically twelve months.
Digital
Data Feeds. Through EDGAR Online Explorer, we license services that integrate
our products into our customers' existing applications. The price for a digital
data feed ranges from approximately $1,200 to $200,000 per year. Prices vary
depending on such factors as the quantity, type and format of information
provided. Revenue from digital data feeds is recognized over the term of the
contract, which are typically non-cancelable, one-year contracts with automatic
renewal clauses, or, in the case of certain up-front fees, over the estimated
customer relationship period.
Other
Services. We provide technical services to Nasdaq. Several of our technical and
non-technical contract employees operate, maintain and support the Nasdaq Online
website. We also generate ancillary advertising and e-commerce revenues through
the sale of advertising banners, sponsorships and through e-commerce activities
such as marketing third party services to the users of our websites. Revenue
from technical services, consisting primarily of time and materials based
contracts, is recognized in the period services are rendered. Advertising and
e-commerce revenue is recognized as the services are provided.
CRITICAL
ACCOUNTING POLICIES
There
have been no material changes in our critical accounting policies and estimates
from those disclosed in Item 7 of our Annual Report on Form 10-K for the year
ended December 31, 2004.
RESULTS
OF OPERATIONS
The
following table sets forth the percentage relationships of certain items from
our Condensed Consolidated Statements of Operations as a percentage of total
revenue.
| |
|
THREE
MONTHS
ENDED
MARCH
31, |
|
| |
|
2005 |
|
2004 |
|
|
Total
revenues |
|
|
100 |
% |
|
100 |
% |
|
Cost
of revenues |
|
|
14 |
|
|
15 |
|
| |
|
Gross
profit |
|
|
86 |
|
|
85 |
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Sales
and marketing |
|
|
27 |
|
|
20 |
|
|
Development |
|
|
16 |
|
|
12 |
|
|
General
and administrative |
|
|
57 |
|
|
61 |
|
|
Depreciation
and amortization |
|
|
14 |
|
|
19 |
|
| |
|
Loss
from operations |
|
|
(27 |
) |
|
(27 |
) |
|
Interest
and other, net |
|
|
-- |
|
|
-- |
|
| |
|
Net
loss |
|
|
(27 |
) |
|
(27 |
) |
| |
REVENUES
Total
revenues for the three months ended March 31, 2005 increased 11% to $3.5
million, from $3.1 million for the three months ended March 31, 2004. The net
increase in revenues is primarily attributable to a $294,000 or 18%, increase in
seat-based subscriptions and a $79,000 or 7%, increase in data sales which was
slightly offset by a $40,000 or 23% decrease in advertising and e-commerce
revenue.
SEAT-BASED
SUBSCRIPTIONS
| |
|
|
QUARTER ENDED MARCH 31, |
|
| |
|
|
2005 |
|
|
2004 |
|
|
Revenues
(in $000s) |
|
$ |
1,899 |
|
$ |
1,605 |
|
|
Percentage
of total revenue |
|
|
54 |
% |
|
51 |
% |
|
Number
of subscribers |
|
|
22,000 |
|
|
23,200 |
|
|
Average
annual price per subscriber |
|
$ |
345 |
|
$ |
277 |
|
The
increase in seat-based subscription revenue is primarily due to a 25% increase
in the average price per subscriber. The increases in subscriptions to our
premium product, EDGAR Online Pro were offset by cancellations and user
migrations from our retail service, EDGAR Online Access. In March 2005, we
outsourced our telesales and reassigned our existing telesales employees to our
account management team in order to sell EDGAR Online Pro to new customers,
reduce cancellations and capitalize on our strategic initiatives and customer
relationships. With an expanded sales team and the launch of I-Metrix, we expect
to continue to increase seat-based subscription revenues and our average price
per subscriber.
DATA
SALES
| |
|
QUARTER ENDED MARCH 31, |
|
| |
|
2005 |
|
2004 |
|
|
Revenues
(in $000s) |
|
$ |
1,241 |
|
$ |
1,162 |
|
|
Percentage
of total revenue |
|
|
35 |
% |
|
37 |
% |
|
Number
of contracts |
|
|
195 |
|
|
220 |
|
|
Average
annual price per contract |
|
$ |
25,465 |
|
$ |
21,127 |
|
Data
sales have increased despite the decrease in the overall number of contracts due
to an increase in the average annual price per contract. The cancellation of
several smaller contracts has been offset by the addition of larger dollar
contracts over the past year.
TECHNICAL
SERVICES
| |
|
|
QUARTER ENDED MARCH 31, |
|
| |
|
|
2005 |
|
|
2004 |
|
|
Revenues
(in $000s) |
|
$ |
230 |
|
$ |
206 |
|
|
Percentage
of total revenue |
|
|
7 |
% |
|
7 |
% |
Beginning
in 2003, Nasdaq, the sole client to which we provide technical services, has
been reducing their technical services contract. We expect technical services
revenue from Nasdaq will be approximately $110,000 in the second quarter of 2005
and anticipate that this will decline further during the remainder of 2005.
ADVERTISING
AND E-COMMERCE
| |
|
|
QUARTER ENDED MARCH 31, |
|
| |
|
|
2005 |
|
|
2004 |
|
|
Revenues
(in $000s) |
|
$ |
133 |
|
$ |
173 |
|
|
Percentage
of total revenue |
|
|
4 |
% |
|
5 |
% |
The
decrease in advertising and e-commerce revenues is primarily due to the decrease
in advertising rates and impressions due to the migration of many of our users
to our premium service that does not support advertisements.
COST
OF REVENUES
Cost of
revenues consists primarily of fees paid to acquire the Level I EDGAR database
feed from the SEC, content feeds, salaries and benefits of operations employees
and the costs associated with our computer equipment and communications lines
used in conjunction with our websites. In addition, for each period, online
barter advertising expense is recorded equal to the online barter advertising
revenue for that period. Total
cost of revenues for the three months ended March 31, 2005 increased $9,000, or
2%, to $494,000 from $485,000 for the three months ended March 31, 2004. The net
increase results primarily from a $64,000 increase in payroll expenses which was
offset by a $45,000 decrease in data costs.
OPERATING
EXPENSES
Sales and
Marketing. Sales and
marketing expenses consist primarily of salaries and benefits, sales
commissions, advertising expenses, public relations, and costs of marketing
materials. Sales
and marketing expenses for the three months ended March 31, 2005 increased
$338,000 or 54%, to $963,000 from $625,000 for the three months ended March 31,
2004, due to a
$222,000 increase in payroll expenses required to increase our sales force as
well as a $101,000 increase in marketing and advertising costs. The additional
costs are related to preparation for the launch of our I-Metrix suite of
products.
Development.
Development expenses for the three months ended March 31, 2005 increased
$155,000, or 39%, to $548,000 from $393,000 for the three months ended March 31,
2004 due to an increase in payroll expenses.
General
and Administrative. General
and administrative expenses consist primarily of salaries and benefits,
insurance, fees for professional services, general corporate expenses and
facility expenses. General
and administrative expenses for the three months ended March 31, 2005 increased
$72,000, or 4%, to $2.0 million from $1.9 million for the three months ended
March 31, 2004 primarily due to a $63,000 increase in professional fees related
to the warrant redemption and rights offering and a $17,000 increase in
insurance expenses.
Depreciation
and Amortization. Depreciation and amortization expenses include the
depreciation of property and equipment and the amortization of definitive lived
intangible assets. Depreciation and amortization for the three months ended
March 31, 2005 decreased $120,000, or 20%, to $476,000 from $596,000 for the
three months ended March 31, 2004, due to the
identifiable intangible assets related to our acquisition of FreeEDGAR in 1999
becoming fully amortized in 2004 as well as several
fixed assets becoming fully depreciated.
LIQUIDITY
AND CAPITAL RESOURCES
We have
historically financed our operations through private debt placements and the
sale of equity securities to investors. We continue to focus on growing our
subscription and corporate customer base while maintaining stringent cost
controls.
Net cash
used in operating activities was $1.2 million for the three months ended March
31, 2005, an increase from net cash used in operating activities of $523,000 for
the three months ended March 31, 2004. This is primarily due to an increase in
accounts receivable resulting from, among other things, price increases for our
services implemented in December 2004 and a greater portion of our revenue being
billed on an annual basis and additional expenditures to increase our sales
efforts.
Capital
expenditures, primarily for computers and equipment, totaled $140,000 for three
months ended March 31, 2005 and $78,000 for the three months ended March 31,
2004. The purchases were made to support our expansion and increased
infrastructure.
In
connection with our acquisition of FIS in October 2000, we issued $6,000,000 in
promissory notes to the former owners of FIS. The notes were originally
scheduled to mature on October 27, 2002. In March 2002, we extended the maturity
date of the notes such that the holders of $5,700,000 in principal amount of the
notes agreed to amend and restate their notes to provide for, among other
things, the following schedule of principal payments: $1,900,000 on April 1,
2002, $1,900,000 on April 1, 2003 and $1,900,000 on January 2, 2004. All
payments have been made and no further obligations remain under these notes.
In May
2004, we sold 2,500,000 units for $2.00 per unit in a public offering. Each unit
consisted of two shares of our common stock and one warrant to purchase one
share of our common stock. An additional 375,000 units were sold to cover
over-allotments. Of the 750,000 shares of common stock included in the
over-allotment units, 300,000 were offered by a selling stockholder and we did
not receive any proceeds from that portion of the over-allotment. We also
issued to the underwriter of the public offering a warrant to purchase 250,000
units for a price of $2.40 per unit. Prior to the redemption described below,
the warrants issued as part of the units had an exercise price of $1.50 and were
exercisable until May 29, 2009. Beginning November 26, 2004, we had the right to
redeem some or all of the warrants at a price of $0.25 per warrant at anytime
after the closing price for our common stock equaled or exceeded $2.00 per share
for any five consecutive trading days by giving certain notice to the then
warrant holders. In March 2005, we exercised our redemption rights by sending
notices
to holders of all of our outstanding public warrants. Pursuant to the
redemption notice, holders of the public warrants were given the opportunity to
exercise their warrants until the close of business on April 28, 2005. After
April 28, 2005, we redeemed any unexercised public warrants at a price of $0.25
per warrant. As a result, 360,675 warrants were exercised in March 2005
resulting in gross proceeds of $541,000 and 2,455,146 warrants were exercised in
April 2005 resulting in gross proceeds of $3.7 million. We paid $15,000 to
redeem 59,179 warrants which were not exercised during the redemption period.
At March
31, 2005, we had cash and short-term investments on hand of $4.0 million which
includes a certificate of deposit (CD) for $2,000,000 at 2.10% that matures in
June 2005. We believe that our existing capital resources, cash received in
April from the exercise of warrants and projected cash generated from operations
will be sufficient to meet our anticipated cash needs for working capital and
capital expenditures for at least the next 12 months. Thereafter, if cash
generated from operations is insufficient to satisfy our liquidity requirements,
we may need to raise additional funds through public or private financings,
strategic relationships or other arrangements. There can be no assurance that
such additional funding, if needed, will be available on terms attractive to us,
or at all. The failure to raise capital when needed could materially adversely
affect our business, results of operations and financial condition. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of our then-current stockholders would be reduced.
Our
future contractual obligations at March 31, 2005, in thousands, were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
2008 |
|
|
2009-2015 |
|
|
TOTAL |
|
|
Operating
leases |
|
$ |
587 |
|
$ |
706 |
|
$ |
459 |
|
$ |
412 |
|
$ |
3,027 |
|
$ |
5,191 |
|
|
Severance
payments |
|
|
82 |
|
|
-- |
|
|
-- |
|
|
-- |
|
|
-- |
|
|
82 |
|
| |
|
|
|
$ |
669 |
|
$ |
706 |
|
$ |
459 |
|
$ |
412 |
|
$ |
3,027 |
|
$ |
5,273 |
|
RISK
FACTORS
The
consolidated financial statements and notes thereto included in this report and
the related discussion describe and analyze our financial performance and
condition for the periods indicated. For the most part, this information is
historical. Our prior results, however, are not necessarily indicative of our
future performance or financial condition. We, therefore, have included the
following discussion of certain factors which could affect our future
performance or financial condition. These factors could cause our future
performance or financial condition to differ materially from its prior
performance or financial condition or from management's expectations or
estimates of our future performance or financial condition. These factors, among
others, should be considered in assessing our future prospects and prior to
making an investment decision with respect to our stock.
WE
HAVE A HISTORY OF LOSSES AND WE EXPECT TO INCUR LOSES FOR THE FORESEEABLE
FUTURE. IF WE ARE UNABLE TO ACHIEVE PROFITABILITY, OUR BUSINESS WILL SUFFER AND
OUR STOCK PRICE IS LIKELY TO DECLINE.
We have
never operated at a profit and we anticipate incurring a loss in 2005, and may
incur additional losses in 2006. At March 31, 2005, we had an accumulated
deficit of $47.3 million. As a result, we will need to increase our revenues
significantly to achieve and sustain profitability. If revenues grow more slowly
than we anticipate, or if operating expenses exceed our expectations or cannot
be adjusted accordingly, we may incur further losses in the future. We cannot
assure you that we will be able to achieve or sustain profitability.
OUR
REVENUES HAVE BEEN DECREASING. IF WE FAIL TO INCREASE REVENUES, WE WILL NOT
ACHIEVE OR MAINTAIN PROFITABILITY.
Our
revenues decreased from approximately $16.2 million in 2002, to approximately
$14.3 million in 2003 to approximately $12.9 million in 2004. Revenues for the
three months ended March 31, 2005 were $3.5 million. To achieve profitability,
we will need to increase revenues substantially through implementation of our
growth strategy and/or reduce expenses significantly. We cannot assure you that
our revenues will grow or that we will achieve or maintain profitability in the
future.
WE
HAVE RECORDED IMPAIRMENT CHARGES IN CONNECTION WITH PRIOR ACQUISITIONS AND MAY
RECORD FURTHER IMPAIRMENT CHARGES IN THE FUTURE, WHICH COULD FURTHER DELAY OUR
PROFITABILITY.
Our
losses in 2002 and 2000 were due, in part, to impairment charges relating to
acquisitions we made in 1999 and 2000. In 2002 and 2000 we wrote down an
aggregate of $15.5 million of goodwill and intangible assets relating to these
acquisitions. We are required to test goodwill annually and between annual tests
if events occur or circumstances change that would more likely than not reduce
the fair value of a reporting unit below its carrying amount. Annual reviews may
result in future periodic impairments that could have a material adverse effect
on the results of operations in the period recognized.
NASDAQ
ACCOUNTS FOR A SIGNIFICANT PERCENTAGE OF OUR TOTAL REVENUE. HOWEVER, OUR NASDAQ
RELATED REVENUE HAS BEEN DECREASING OVER THE LAST FEW YEARS AND WE EXPECT THAT
THIS TREND WILL CONTINUE.
A
significant portion of our total revenues over the last two fiscal years has
been attributable to the numerous work orders that we have performed under our
agreements with Nasdaq. Sales to Nasdaq accounted for 14% of our total revenue
during the three months ended March 31, 2005 and 2004. We expect that Nasdaq
will continue to be a significant customer, but that revenues from Nasdaq will
continue to decline. The loss of a significant customer such as Nasdaq would
have a material adverse effect on our attempt to achieve profitability.
IF
WE CANNOT GENERATE NEW SUBSCRIBERS, WE MAY NOT ACHIEVE PROFITABILITY.
To
increase our revenues and achieve profitability, we must increase our subscriber
base significantly. We generate most of our leads for new subscribers from our
websites and through our content distribution relationships from such websites
as Yahoo! and Terra Lycos. These leads must be converted into subscriptions for
one or more of our products and services at a rate higher than what we have been
able to achieve so far. If we fail to do so, we may not achieve profitability.
THE
TIMELINESS OF ACCEPTANCE OF XBRL IS UNCERTAIN AND ITS FAILURE TO GROW COULD
ADVERSELY AFFECT THE GROWTH OF OUR BUSINESS.
We
believe our future growth depends, in part, on the adoption of the new XBRL data
standard. In particular, we believe that our initiative with the I-Metrix suite
of products will provide us with a new source of subscribers. These products are
designed solely for analyzing documents that have been formatted in XBRL and for
use exclusively with the Microsoft Office System. Since I-Metrix is based on a
new reporting language data standard, it is difficult to predict the demand,
timing and rate of market adoption of this standard. As a result, our business
and prospects could be affected if XBRL is not quickly and widely adopted.
OUR
FUTURE SUCCESS DEPENDS, IN PART, ON FURTHER DEVELOPING OUR INITIATIVES THROUGH
THE MICROSOFT OFFICE SYSTEM. FAILURE TO DO SO MAY IMPAIR OUR ABILITY TO GROW AND
BECOME PROFITABLE.
In July
2004, we entered into a license agreement with Microsoft, and we received
certain license rights to develop and distribute an EDGAR Online branded version
of Microsoft’s financial information analysis software. The software that we
have licensed is a part of our I-Metrix suite of products, which have just been
introduced to the market in April 2005. Also in April 2005, Microsoft began
presenting us as a featured partner in its XBRL scenario within the Solution
Showcase for the Microsoft Office System. Microsoft features us and our I-Metrix
suite of products on a Web page highlighting solutions that use XBRL to enhance
the power of Microsoft Office to solve critical business issues. We cannot
assure you that this initiative will be successful. If this initiative is not
successful, we may not be able to increase our revenues and achieve
profitability in the short-term.
THE
INDUSTRY IN WHICH WE OPERATE IS HIGHLY COMPETITIVE AND HAS LOW BARRIERS TO
ENTRY. INCREASED COMPETITION WOULD MAKE PROFITABILITY EVEN MORE DIFFICULT TO
ACHIEVE.
We
compete with many providers of business and financial information including
Bloomberg, S&P’s Capital IQ, Dun & Bradstreet, Global Securities
Information, Reuters, Standard & Poor's, Thomson Financial, 10-K Wizard, MSN
and Yahoo! Our industry is characterized by low barriers to entry, rapidly
changing technology, evolving industry standards, frequent new product and
service introductions and changing customer demands. Many of our existing
competitors have longer operating histories, name recognition, larger customer
bases and significantly greater financial, technical and marketing resources
than we do. Current competitors or new market entrants could introduce products
with features that may render our products and services obsolete or
uncompetitive. To be competitive and to serve our customers effectively, we must
respond on a timely and cost-efficient basis to changes in technology, industry
standards and customer preferences. The cost to modify our products, services or
infrastructure in order to adapt to these changes could be substantial and we
cannot assure you that we will have the financial resources to fund these
expenses. Increased competition could result in reduced operating margins, as
well as a loss of market share and brand recognition. If these events occur,
they could have a material adverse effect on our revenue.
FUTURE
ENHANCEMENTS TO THE SEC'S EDGAR SYSTEM MAY ERODE DEMAND FOR OUR SERVICES AND OUR
REVENUES MAY SUFFER AS A RESULT.
Our
future success will depend on our ability to continue to provide value-added
services that distinguish our products from the type of EDGAR-information
available from the SEC on its website. The SEC currently provides free access on
its website to raw EDGAR filings on a real-time basis. If the SEC were to make
other changes to its website such as providing value-added services comparable
to those provided by us, our results of operations and financial condition would
be materially and adversely affected. Additionally, if the SEC were to enhance
or upgrade services available on its website or the EDGAR filing system, we
would need to tailor our products and services to be compatible with these new
architectures or technologies, which would increase costs. If we are unable to
do this, there may be a reduction in demand for our products and services and
our revenues may suffer as a result.
OUR
BUSINESS COULD BE ADVERSELY AFFECTED BY ANY ADVERSE ECONOMIC DEVELOPMENTS IN THE
FINANCIAL SERVICES INDUSTRY AND/OR THE ECONOMY IN GENERAL.
We depend
on the continued demand for the distribution of business and financial
information. Therefore, our business is susceptible to downturns in the
financial services industry and the economy in general. Our 2003 and 2004
results of operations reflect, in part, the effects of the slowdown in our
markets, which have only recently begun to improve. For example, we believe that
decreases in the expenditures that corporations and individuals are willing to
make to purchase the types of information we provide has resulted in a slower
growth in the number of customers purchasing our information services. Any
significant downturn in the market or in general economic conditions would
likely hurt our business.
IF
WE FAIL TO DEVELOP AND INTRODUCE NEW PRODUCTS AND SERVICES, OUR SALES AND
COMPETITIVE POSITION WILL SUFFER.
Our
market is characterized by rapidly changing technologies, evolving industry
standards, frequent new product and service introductions and changing customer
demands. To be successful, we must continue to enhance our existing services and
develop and add new services by introducing products and services embodying new
technologies, such as XBRL, to address our customers' changing demands in a
timely and cost effective manner. Our business could be adversely affected if we
were to incur significant costs without generating related revenues or if we
cannot adapt rapidly to these changes. Our business could also be adversely
affected if we experience difficulties in introducing new or enhanced services
or if these services are not favorably received by users. We may experience
technical or other difficulties that could delay or prevent us from introducing
new or enhanced services. If we are not successful in developing and marketing
enhancements to our existing products and services or our products and services
do not incorporate new technology on a timely basis, we may become less
competitive and our revenues may suffer as a result.
FUTURE
ACQUISITIONS AND BUSINESS COMBINATIONS THAT WE CONSUMMATE MAY BE DIFFICULT TO
INTEGRATE, DISRUPT OUR BUSINESS, DILUTE STOCKHOLDER VALUE OR DIVERT MANAGEMENT
ATTENTION.
We may
continue to expand our operations and market presence by making acquisitions and
entering into business combinations, investments, joint ventures or other
strategic alliances, with other companies. We may have to issue debt or equity
securities to pay for future acquisitions, which could be dilutive to our then
current stockholders. No specific transactions are pending at the current time
and we cannot assure you that we will consummate any transactions in the future.
However, these transactions create risks, such as:
-
difficulty assimilating the operations, technology and personnel of the combined
companies;
-
disrupting our ongoing business;
-
problems retaining key technical and managerial personnel;
-
additional operating losses and expenses of acquired businesses; and
-
impairment of relationships with existing employees, customers and business
partners.
Any of
the events described in the foregoing paragraph could have an adverse effect on
our business, financial condition and results of operations and could cause the
price of our common stock to decline.
WE
DEPEND ON KEY PERSONNEL, THE LOSS OF WHOM COULD THREATEN OUR ABILITY TO OPERATE
OUR BUSINESS SUCCESSFULLY.
Our
future success will depend to a significant extent on the continued services of
our senior management and other key personnel, particularly Susan Strausberg,
our Chief Executive Officer, President and Secretary, Greg D. Adams, our Chief
Financial Officer and Chief Operating Officer, Marc Strausberg, our Chairman,
Stefan Chopin, our Chief Technology Officer and Morton Mackof, Executive Vice
President of Sales, all of whom are parties to written employment agreements.
The loss of the services of any of them, or the services of other key employees,
would likely have a material adverse effect on our business. We do not maintain
key person life insurance for any of our personnel. Our future success will also
depend on our continuing to attract, retain and motivate other highly skilled
employees. Competition for qualified personnel in our industry is intense. We
may not be able to retain our key employees or attract, assimilate or retain
other highly qualified employees in the future. If we do not succeed in
attracting new personnel or retaining and motivating our current personnel, our
business will be adversely affected. In addition, the employment agreements with
our key employees contain covenants that restrict their ability to compete
against us or solicit our customers. These restrictive covenants, or some
portion of these restrictive covenants, may be deemed to be against public
policy and may not be fully enforceable. If these provisions are not
enforceable, these employees may be in a position to leave us and work for our
competitors or start their own competing businesses.
WE
MAY ENCOUNTER RISKS RELATING TO SECURITY OR OTHER SYSTEM DISRUPTIONS AND
FAILURES THAT COULD REDUCE THE ATTRACTIVENESS OF OUR SITES AND THAT COULD HARM
OUR BUSINESS.
Although
we have implemented in our products various security mechanisms, our business is
vulnerable to computer viruses, physical or electronic break-ins and similar
disruptions, which could lead to interruptions, delays or loss of data. For
instance, because a portion of our revenue is based on individuals using credit
cards to purchase subscriptions over the Internet and a portion from advertisers
who seek to encourage people to use the Internet to purchase goods or services,
our business could be adversely affected by these break-ins or disruptions.
Additionally, our operations depend on our ability to protect systems against
damage from fire, earthquakes, power loss, telecommunications failure, and other
events beyond our control. Moreover, our websites and business solutions have,
in the past, and may in the future, experience slower response times or other
problems for a variety of reasons, including hardware and communication line
capacity restraints, software failures or during significant increases in
traffic when there have been important business or financial news stories and
during the seasonal periods of peak SEC filing activity. These strains on our
system could cause customer dissatisfaction and could discourage visitors from
becoming paying subscribers. Although we have redundant feeds to our facilities,
we also depend on the Level I EDGAR feed we purchase in order to provide SEC
filings on a real-time basis. Our websites could experience disruptions or
interruptions in service due to the failure or delay in the transmission or
receipt of this information. These types of occurrences could cause users to
perceive our websites and technology solutions as not functioning properly and
cause them to use other methods or services of our competitors. Any disruption
resulting from these actions may harm our business and may be very expensive to
remedy, may not be fully covered by our insurance and could damage our
reputation and discourage new and existing users from using our products and
services. Any disruptions could increase costs and make profitability even more
difficult to achieve.
IF
WE FAIL TO SECURE OR PROTECT OUR PROPRIETARY RIGHTS, COMPETITORS MAY BE ABLE TO
USE OUR TECHNOLOGIES, WHICH COULD WEAKEN OUR COMPETITIVE POSITION, REDUCE OUR
REVENUE OR INCREASE OUR COSTS.
Our
trademarks and other proprietary rights, principally our proprietary database
technology, are essential to our success and our competitive position. We seek
to protect our trademarks and other proprietary rights by entering into
confidentiality agreements with our employees, consultants and content
distribution partners, and attempting to control access to and distribution of
our proprietary information. We also believe that factors such as the
technological and creative skills of our personnel, new product developments,
frequent product enhancements, name recognition, and reliable product
maintenance are essential to establishing and maintaining a technology
leadership position. We have obtained a non-exclusive, royalty-free license from
the SEC to use the term EDGAR in our trademarks, service marks and corporate
name. We have not, however, relied on a combination of copyright, trade secret
and trademark laws in order to protect our proprietary rights.
Despite
our efforts to protect our proprietary rights from unauthorized use or
disclosure, third parties may attempt to disclose, obtain or use our proprietary
information. The precautions we take may not prevent this type of
misappropriation. In addition, our proprietary rights may not be viable or of
value in the future since the validity, enforceability and scope of protection
of proprietary rights in Internet-related industries is uncertain and still
evolving. Additionally, third parties could claim that our database technology
infringes their proprietary rights. Claims of this sort and any resultant
litigation, should it occur, could result in us being liable for damages and
could result in our proprietary rights being invalidated. Even if we prevail,
litigation could be time-consuming and expensive, and could divert the time and
attention of management, any of which could materially adversely affect our
business, results of operations and financial condition. Any claims or
litigation could also result in limitations on our ability to use our trademarks
and other intellectual property unless we enter into license or royalty
agreements, which agreements may not be available on commercially reasonable
terms, if at all.
LEGAL
UNCERTAINTIES AND GOVERNMENT REGULATION OF THE INTERNET COULD ADVERSELY AFFECT
OUR BUSINESS.
Many
legal questions relating to the Internet remain unclear and these areas of
uncertainty may be resolved in ways that damage our business. It may take years
to determine whether and how existing laws governing matters such as
intellectual property, privacy, libel and taxation apply to the Internet. In
addition, new laws and regulations that apply directly to Internet
communications, commerce and advertising are becoming more prevalent. As the use
of the Internet grows, there may be calls for further regulation, such as more
stringent consumer protection laws.
These
possibilities could affect our business adversely in a number of ways. New
regulations could make the Internet less attractive to users, resulting in
slower growth in its use and acceptance than is expected. We may be affected
indirectly by legislation that fundamentally alters the practicality or
cost-effectiveness of utilizing the Internet, including the cost of transmitting
over various forms of network architecture, such as telephone networks or cable
systems, or the imposition of various forms of taxation on Internet-related
activities. Complying with new regulations could result in additional cost to
us, which could reduce our profit margins or leave us at risk of potentially
costly legal action.
WE
COULD FACE LIABILITY AND OTHER COSTS RELATING TO OUR STORAGE AND USE OF PERSONAL
INFORMATION ABOUT OUR USERS.
Users
provide us with personal information, including credit card information, which
we do not share without the user's consent. Despite this policy of obtaining
consent, however, if third persons were able to penetrate our network security
or otherwise misappropriate our users' personal or credit card information, we
could be subject to liability, including claims for unauthorized purchases with
credit card information, impersonation or other similar fraud claims, and
misuses of personal information, such as for unauthorized marketing purposes.
New privacy legislation may further increase this type of liability. California,
for example, recently passed a privacy law that would apply to a security breach
that affects unencrypted, computerized personal information of a California
resident. Furthermore, we could incur additional expenses if additional
regulations regarding the use of personal information were introduced or if
federal or state agencies were to investigate our privacy practices.
OUR
COMMON STOCK COULD BE DELISTED FROM THE NASDAQ NATIONAL MARKET, WHICH WOULD MAKE
TRADING IN OUR STOCK MORE DIFFICULT.
At
various times during the period from February 2003 through October 2004, the
closing bid price of our common stock was below $1.00. If the closing bid price
of our stock were to drop below $1.00 per share and remain below $1.00 per share
for thirty consecutive business days, we would be in violation of the continued
listing requirements of the Nasdaq National Market and would risk the delisting
of our shares from Nasdaq. On August 27, 2004, we received a letter from Nasdaq
indicating that we were not in compliance with the minimum bid price
requirement. By October 19, 2004, however, we demonstrated full compliance with
this requirement. However, even if the minimum per share bid price of our common
stock is maintained, we must also satisfy other listing requirements of the
Nasdaq National Market, such as maintaining equity of at least $10 million. If
we fail to satisfy any of the maintenance requirements, our common stock could
be delisted from the Nasdaq National Market. In that event we could apply to
list our shares with the Nasdaq SmallCap Market or, if we fail to satisfy the
maintenance requirements of the Nasdaq SmallCap Market, we would list our shares
on the Over the Counter Bulletin Board. Either option could adversely affect the
liquidity and price of our common stock and make it more difficult for us to
raise additional capital on favorable terms, if at all.
THE
PRICE OF OUR COMMON STOCK HAS BEEN VOLATILE.
The
market price of our common stock has been, and is likely to continue to be,
volatile and subject to wide fluctuations. Over the 52-week period ending May 9,
2005, the highest closing sales price of our common stock was $3.95 and the
lowest closing sales price of our common stock was $0.71. In recent years,
the stock market has experienced significant price and volume fluctuations,
which has impacted the market prices of equity securities and viability of many
small-cap companies. Some of these fluctuations appear to be unrelated or
disproportionate to the operating performance of such companies. Future market
movements may materially and adversely affect the market price of our common
stock.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There
have been no material changes in our exposure to market risk from that disclosed
in Item 7A of our Annual Report on Form 10-K for the year ended December 31,
2004.
ITEM 4. CONTROLS AND PROCEDURES
We,
including our Chief Executive Officer and Chief Financial Officer, have
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Rule 13a-15 and Rule 15d-15 under
the Exchange Act as of the end of the period covered by this report. Based on
that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective in ensuring
that information required to be disclosed by us in the reports we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms.
There
have been no significant changes in internal controls, or in other factors that
have materially affected, or are reasonably likely to material affect internal
controls, subsequent to the date our Chief Executive Officer and Chief Financial
Officer completed their evaluation.
Notwithstanding
the foregoing, there can be no assurance that our disclosure controls and
procedures will detect or uncover all failures of our employees and our
consolidated subsidiaries to disclose material information otherwise required to
be set forth in our periodic reports.
PART
II. OTHER INFORMATION.
ITEM
1. LEGAL PROCEEDINGS.
During
the quarter, there were no significant developments in the Company's legal
proceedings. For a detailed discussion of the Company's legal proceedings,
please see the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2004.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM
5. OTHER INFORMATION.
ITEM
6. EXHIBITS
| |
EXHIBIT NO. |
|
DESCRIPTION |
| |
|
|
|
| |
31.1 |
|
Certification of Chief Executive Officer
pursuant Section 302 of the Sarbanes-Oxley Act of 2002. |
| |
|
|
|
| |
31.2 |
|
Certification of Chief Financial Officer
pursuant Section 302 of the Sarbanes-Oxley Act of 2002. |
| |
|
|
|
| |
32.1 |
|
Certification of Chief Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| |
|
|
|
| |
32.2 |
|
Certification of Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
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.
| |
|
EDGAR ONLINE, INC.
|
| |
|
(Registrant) |
| |
|
|
| Dated: May 16, 2005 |
|
/s/ Susan Strausberg |
| |
|
Susan Strausberg |
| |
|
President, Chief Executive Officer and
Secretary |
| |
|
|
| |
|
|
| |
|
/s/ Greg D. Adams |
| |
|
Greg D. Adams |
| |
|
Chief Operating Officer and Chief
Financial Officer |