Here are some recent stories that cover the company's explosive revenue growth, improving fundamentals (declining cash burn rate), new product and bread and butter products, future plans to bolster revenue growth (advertising revenues are extremely high margin), institutional interest, strategy to appeal for an exception to the Nasdaq listing rules, the issues involved in the delisting inquiry, and the company's initial take on the Nasdaq panel's reaction ("well received"):
<< November 13, 1998
Infonautics Up 150% As Word Of Co.'s New Web Site Spreads
Dow Jones Newswires
By Joelle Tessler
NEW YORK (Dow Jones)--Infonautics Inc. (INFO) became the latest tiny
company to see its stock take off because it does business on the Internet.
Infonautics shares are up 250% as word of the company's new Web site,
Company Sleuth, has spread on Wall Street.
Company Sleuth searches electronic databases to collect corporate information
- including details on insider selling, patents, short interest, domain name
registrations, stock ratings, news and chat-room gossip - that investors in
particular find useful.
"A bunch of people I know in the investment community are checking this
out," said Jeff Matthews, portfolio manager at RAM Partners, who sees huge
potential in Company Sleuth.
Mike Harrold, a technology analyst at the Boca Consulting Group, explained
that the service provides information that many people don't have the time to
seek out or don't know how to find.
"It's like the everyday Joe's personal assistant," he said.
Infonautics' shares earlier hit a new high of 10 1/2, passing a previous high of
8 5/8 set on April 20 in the midst of last spring's craze for just about any
company trying to make money on the Internet.
The shares were recently up 5 15/16, or 250%, at 8 5/16 on Nasdaq volume of
9.1 million, compared with an average daily volume of 90,300.
Harrold of Boca Consulting believes Infonautics' Company Sleuth, which was
launched on Oct. 20, has the potential to attract the critical mass of eyeballs
that draws advertisers to a Web site since the information it provides is so
useful.
He noted that Company Sleuth is one of the Web pages he leaves open on his
computer desktop for hours at a time and visits regularly to use as a
springboard to other information on the Internet.
"I am just in awe of what this thing can do," Harrold said. In contrast, Harrold
spends only "minutes a day" on America Online Inc.'s (AOL) online service.
"This is the kind of product that catches fire very quickly," said Van Morris,
Infonautics' president and chief executive.
"It seems to be capturing the imagination and interest of a lot of people in the
marketplace," Morris added, noting that Company Sleuth has received a lot of
press attention in recent weeks.
Despite the potential of the Company Sleuth, there is a cloud hanging over
Infonautics' shares since the stock is under the threat of being delisted by
Nasdaq since the company doesn't meet the exchange's net tangible assets
requirement.
Among other criteria, a company must have net tangible assets - which are
total assets minus total liabilities minus goodwill - of at least $4 million to be
listed on Nasdaq's National Market, said Mike Shokouhi, a spokesman for the
exchange.
According to Harrold of Boca Consulting, however, the recent jump in
Infonautics' share price could potentially remove this issue.
This is because a company that does not meet the net tangible assets
requirement can remain listed on the National Market if it meets an alternative
set of criteria.
These include a minimum bid price of $5 a share for its stock. In addition, the
company must have either a $50 million market capitalization or total assets and
revenue of $50 million for the most recently completed fiscal year or for two
of the past three fiscal years.
With about 9.7 million shares outstanding, Infonautics would meet these first
two requirements if its share price gets above a little over $5.
Morris, Infonautics' CEO, would not comment on the possibility that the stock
won't be delisted other than to say that the delisting decision is "at Nasdaq's
discretion."
But he did explain that Infonautics does not meet the exchange's net tangible
assets requirement because of the accounting rules governing how the
company must recognize revenue from its main business, the Electric Library,
which provides online reference materials to schools, libraries and individual
subscribers.
Because Infonautics must recognize revenue from Electric Library
subscriptions ratably over the life of a subscription, it must record much of the
sale of a subscription for the service as deferred revenue - which shows up on
the liabilities side of the balance sheet, Morris said.
These accounting rules, he added, are "particularly punitive for a young
growing company because as sales increase, deferred revenues increase."
"It's choking them," Harrold said. "But it's only an accounting issue."
At the end of the third quarter, Infonautics had $8 million in deferred revenue
on the liability side of its balance sheet, Morris said. >>
<< Infonautics Leaps, Street Warms to Web Site
Reuters Story - November 13, 1998 15:26
NEW YORK, Nov 13 (Reuters) - Shares of Infonautics Inc., an online information company, tripled in value on Friday as investors warmed to its newest product, a search engine that scours the Web for little-known facts about public companies.
The Wayne, Pa.-based company's shares traded at seven, up 4-5/8 from Thursday, and reached a 52-week high of 10-1/2 in the session.
Van Morris, president and chief executive, said Company Sleuth, which sniffs out data from new trademarks and patents to domain name registrations and government filings, has piqued Wall Street's interest in its overall operations.
"Company Sleuth is certainly grabbing a ton of attention," he said, "and that attention is also helping illustrate the real fundamental growth of the company."
Morris highlighted the revenue growth of Infonautics, which also operates Electric Library, a computer search service with access to hundreds of magazines, newspapers, and reference works, radio and TV transcripts, maps, and photographs.
In October, it reported third quarter revenues of $4.1 million, 149 percent above a year ago, and nine month revenues of $10.3 million, versus $4.4 million in 1997.
It reported a third quarter net loss of $0.44 a share, against $0.41 in the same period a year ago.
The Company Sleuth site is free and currently has no advertising, but Morris anticipates it will incorporate ads and corporate sponsorship early in 1999.
He added that that company is awaiting a response from Nasdaq, after it met with a Nasdaq panel on Nov. 5 regarding its potential delisting.
Nasdaq in October said the company no longer met its the minimun net tangible asset requirements for continued listing. Infonautics has said that if Nasdaq opted to delist the stock, it expects that its shares would be quoted on the OTC Bulletin Board. >>
<< November 6, 1998
Infonautics Up 80%; Co Cites BusinessWeek Story On Web Site
Dow Jones Newswires
NEW YORK -- Infonautics Inc. (INFO) shares lept 81.8% Friday, gains the
company attributed to a short article published in the latest edition of Business
Week describing CompanySleuth, an Infonautics-operated Web site that
searches electronic databases for company information.
One trading source cited Infonautics own news release, issued after the close
of trading Thursday, which plugged CompanySleuth as a online source of
investment information. "It looks like an overreaction to me," the trader added.
According to the company's release, investors are starting to use the Web site
to gain what it calls "free, legal insider information" on stocks.
Infonautics, a Wayne, Pa., Web site operator, said CompanySleuth sends
e-mails to subscribers relating information it culled from free databases on the
Web, including Securities and Exchange Commission and patent filings. Like
most others, the site makes money through advertising.
But Friday's gain comes as the company faces delisting from Nasdaq after it
failed to meet the exchange's net tangible-asset requirement.
The company met with the National Association of Securities Dealers at a
delisting hearing on Thursday. Infonautics spokesman Bob Wright said the
company's statements were "well received" by NASD officials. He declined to
elaborate further.
Shares of the company stood recently at 2 1/2, up 1 1/8, or 81.8%. Volume
was a brisk 1.1 million, well above the 36,610 daily average.
- Scott Eden; 201-938-5173 >>
<< Infonautics' New Product Finds Buzz
CompanySleuth Trolls Web for Relevant Information
By Darren Chervitz, CBS MarketWatch
Last Update: 2:41 PM ET Nov 5, 1998
SAN JOSE, Calif. (CBS.MW) -- Investors looking for that extra edge may
want to check out Infonautics' new CompanySleuth product, which searches
free databases on the Web for information such as insider trades and
trademark filings.
With very little official marketing, CompanySleuth
has attracted a user base that's a "5-digit number and
counting" since it was launched last month in beta
form, said Josh Kopelman, executive vice president
and co-founder of the Wayne, Pa.-based Infonautics
(INFO), which operates a few other Web sites,
including the eLibrary and Encyclopedia.com
reference services.
Infonautics shares rose 1/16 Thursday to 1 7/16, well
off the 8 5/8 high reached in April.
Whirling viral marketing
Kopelman attributes CompanySleuth's early success to
good word-of-mouth, or what's often called viral
marketing. "One person at Whirlpool signed up the
first day, and now there are over 30," he said. "You
could almost picture the e-mails being sent around."
In January, Infonautics plans to launch a more
extensive marketing campaign along with
announcements of charter advertisers for the free service, he said.
The company is also looking at 25 or so additional content sources to expand
the information provided by CompanySleuth. Possibilities include SEC filings,
product recalls and shareholder lawsuits, Kopelman said. The service now
only tracks publicly traded companies but private firms will also be added.
CompanySleuth, which sends an e-mail every day to users with information
on the stocks they've chosen to track (up to 10 are allowed), will generate
revenue primarily from advertising and e-commerce relationships, but could
also charge users for certain premium information, Kopelman said.
Close to real-time
Information discovered by the product, however, is usually on the Web for up
to 24 hours before it's found. Kopelman admitted that people who know
where to look and have the time to go to each site could find the same
information.
For instance, GeoCities (GCTY) recently registered several new domain
names, such as geovillage.com, with InterNIC, which published the
information on Monday. CompanySleuth found it on Tuesday and this reporter
got an e-mail with the update on Wednesday morning. (Another recent domain
name registered by GeoCities: Geosucks.com.)
One huge fan of the product is Bruce Judson, the co-creator of Time
Warner's Pathfinder service and now the editor of an independent online paid
newsletter Grow Your Profits.
Judson, author of the books Net Marketing and the upcoming HyperWars,
recommended the product in his Oct. 30 issue, calling CompanySleuth "the
first service I have seen that makes it easy to continuously monitor the vast
range of potentially valuable information available about a specific company on
the Web."
Business executives wanting to get a bead on what competitors or prospective
clients are doing will also benefit from the product, Judson said.
Scoops that move stocks
Much of the information on CompanySleuth -- such as new message board
postings on Yahoo! and Motley Fool or analyst reports -- isn't likely to be of
much use for investors, but the service could come up with some potential
profitable scoops. If CompanySleuth had been available, it would have found
out about patents registered by Open Market (OMKT) weeks before the
company officially announced them in a March press release that sent the
stock up 15 percent, said Judson, who is on Open Market's board of
directors.
Or take the case of Microsoft (MSFT), which in May filed a trademark for
the name TaxSaver and then registered the TaxSaver.com Web address the
next day. It wasn't until July that a trade magazine broke the news that
Microsoft was planning to ship a product to compete with Intuit's (INTU)
TurboTax.
Kopelman warned that investors should only use what CompanySleuth finds
as a starting point to doing more in-depth research. "Not everything we give
here is going to move the stock price," he said.
Darren Chervitz is a reporter for CBS MarketWatch. >>
<< October 19, 1998
Infonautics Falls 33% Following Delisting Letter, 3Q Earns
Dow Jones Newswires
By Dinah Wisenberg Brin
PHILADELPHIA (Dow Jones)--Shares of Infonautics Inc. (INFO) plunged
33% Monday morning after the company announced it had received a Nasdaq
delisting letter and reported third-quarter earnings losses wider than a year
earlier.
The Wayne, Pa., Internet reference company's shares traded recently at 1 3/8,
down 11/16, or 33.3%, on volume of 178,600, compared with a daily average
volume of 22,800. Earlier, the stock fell as low as 1 1/16, past the previous 1
3/8 bottom set Oct. 8.
The National Association of Securities Dealers has scheduled a Nov. 5 hearing
on Infonautics' delisting. As reported, the company said in a press release that
if the panel rules unfavorably, it will list its stock on the over-the-counter
Bulletin Board.
Infonautics also released its third-quarter financial results Monday, reporting it
widened its losses to 44 cents a share form 41 cents a year earlier. Revenue
grew to $4.1 million from $1.7 million, while operating costs increased to $7.3
million from $5.1 million.
Hurting earnings and net asset figures, Infonautics President and Chief
Executive Van Morris told Dow Jones, are conservative accounting rules that
require the company to defer adding new sales as revenue until it delivers the
services.
In the third quarter, for example, Infonautics had $5.8 million in new sales but
could report only $4.1 million in revenue. It ended the quarter with $11.1
million in "deferred revenue and backlog," Morris said, "a huge untapped value
in the current quarter."
Despite the loss, third-quarter results beat analyst expectations, according to
Morris. According to First Call, one analyst had expected a 49-cent loss.
Revenue was were up 149% for the quarter and the cash burn level was the
lowest since the company went public, Morris said.
"This is a company with real growth, improving fundamentals, significant
market share position" and more than 9,500 schools and libraries signed up for
its online electric library reference services, he said. "The accounting
conventions we're required to use create large deferred revenue balances,
which show up as a liability."
At its NASD hearing next month, Infonautics will tout its progress and value
and seek an exception to asset requirements that companies must meet to
remain listed, Morris said.
Considering the delisting letter announcement, he said, Infonautics officials
were not surprised at the stock's performance Monday.
Also on Monday, Infonautics introduced Company Sleuth, a free
business-information Internet service.
- Dinah Wisenberg Brin; 215-656-8285 >>
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