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 June 30, 1996
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 0-27280
META Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 06-0971675
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
208 Harbor Drive, Stamford, Connecticut 06912-0061
(Address of principal executive offices, including Zip Code)
(203) 973-6700
(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) No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: The number of shares
of the issuer's Common Stock, $.01 par value per share, outstanding as of
July 22, 1996 was 6,187,557.
Total Number of Pages: 17
Exhibit Index is on Page 15
<PAGE>
META Group, Inc.
INDEX
Page
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets:
June 30, 1996 (unaudited) and December 31, 1995 3
Statements of Income (unaudited):
Three months ended June 30, 1996 and 1995
Six months ended June 30, 1996 and 1995 4
Statements of Cash Flows (unaudited):
Six months ended June 30, 1996 and 1995 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security
Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature 14
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
META Group, Inc.
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(unaudited)
------------- -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $35,413 $35,525
Accounts receivable, net 11,051 10,547
Deferred commissions 1,123 1,150
Deferred tax asset 447 616
Other current assets 425 326
------- -------
Total current assets 48,459 48,164
Furniture and equipment, net 1,919 1,668
Deferred tax asset 5,058 2,362
Other assets 490 162
------- ------
Total assets $55,926 $52,356
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 30 $ 845
Accrued compensation and
other expenses 964 3,086
Deferred revenues 17,557 16,557
------- -------
Total current liabilities 18,551 20,488
------- ------
Stockholders' equity:
Preferred stock -- --
Common stock 66 59
Additional paid-in capital 39,913 35,863
Treasury stock, at cost (320) (320)
Accumulated deficit (2,284) (3,734)
------ ------
Total stockholders' equity 37,375 31,868
------ ------
Total liabilities and
stockholders' equity $55,926 $52,356
======= =======
</TABLE>
<PAGE>
META Group, Inc.
STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Continuous Services $ 8,704 $ 6,361 $16,844 $12,267
Other 1,500 727 2,931 1,295
------- ------- ------- -------
Total revenues 10,204 7,088 19,775 13,562
------- ------- ------- -------
Operating expenses:
Cost of services and
fulfillment 4,875 3,932 9,672 7,268
Selling and marketing 3,084 2,112 5,809 4,232
General and administrative 1,143 756 2,189 1,373
Depreciation and amortization 251 153 476 300
------- ------- ------- -------
Total operating expenses 9,353 6,953 18,146 13,173
------- ------- ------- -------
Operating income 851 135 1,629 389
Gain on sale of investment -- 250 -- 250
Interest income, net 454 8 918 29
------- ------- ------- -------
Income before taxes 1,305 393 2,547 668
Provision for income taxes 574 -- 1,097 --
------- ------- ------- -------
Net income $ 731 $ 393 $ 1,450 $ 668
======= ======= ======= =======
Net income per share $ .09 $ .08 $ .18 $ .14
======= ======= ======= =======
Weighted average shares
outstanding 8,003 4,894 7,993 4,946
======= ======= ======= =======
</TABLE>
<PAGE>
META Group, Inc.
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
For the six months ended
JUNE 30,
1996 1995
------------------------
<S> <C> <C>
Operating activities:
Net income $ 1,450 $ 668
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 476 300
Gain on sale of investment -- (250)
Deferred income taxes (2,527) --
Tax benefit from disqualifying dispositions 3,576 --
Changes in assets and liabilities:
Accounts receivable (504) 411
Deferred commissions 27 98
Other current assets (99) (2)
Other assets (328) (20)
Accounts payable (815) (303)
Accrued compensation and other expenses (2,122) (822)
Deferred revenues 1,000 1,183
------ ------
Cash provided by operating activities 134 1,263
------ ------
Investing activities:
Capital expenditures (727) (355)
Proceeds from sale of investment -- 265
------ ------
Cash used in investing activities (727) (90)
------ ------
Financing activities:
Payment of debt -- (250)
Proceeds from stock option exercises 392 77
Tax expense on non-qualified stock options
exercise (36) --
Proceeds from employee stock purchase plan
exercises 153 --
Repurchase of common stock -- (114)
Costs related to Initial Public Offering (33) --
Capital contribution 5 --
--- ----
Cash provided by (used in) financing activities 481 (287)
--- ----
Net (decrease) increase in cash and cash
equivalents (112) 886
Cash and cash equivalents, beginning of period 35,525 301
------- -------
Cash and cash equivalents, end of period $35,413 $ 1,187
======= =======
</TABLE>
<PAGE>
META Group, Inc.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Interim Financial Statements
The accompanying unaudited interim financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and pursuant to the rules and regulations of
the Securities and Exchange Commission for reporting on Form 10-Q.
Accordingly, certain information and footnote disclosures required for
complete financial statements are not included herein. It is recommended
that these financial statements be read in conjunction with the financial
statements and related notes of META Group, Inc. (the "Company") as
reported on the Company's Annual Report on Form 10-K for the year ended
December 31, 1995. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a
fair presentation of financial position, results of operations and cash
flows at the dates and for the periods presented have been included.
Note 2 - Public Offering of Common Stock and Recapitalization
In December 1995, the Company completed an initial public offering of
1,860,000 shares of common stock at $18 per share (the "Offering"). Prior
to the Offering, there was no public market for the Company's common stock.
The net proceeds of the Offering, after deducting applicable issuance costs
and expenses, were $30,207,000.
In connection with the Offering, the Company (a) increased its authorized
common stock from 1,800,000 shares to 45,000,000 shares, (b) declared a
4-for-1 split of its common stock in the form of a stock dividend effective
October 5, 1995, and (c) authorized 2,000,000 shares of new $.01 par value
preferred stock.
Note 3 - Income Taxes
During the quarter and six months ended June 30, 1996, the Company
recorded a tax provision of $574,000 and $1,097,000 respectively, reflecting
an effective tax rate of 44% and 43%, respectively. No tax provision was
recorded for the quarter or six months ended June 30, 1995 since the
previously established valuation allowance against available net operating
loss carryforwards was released to offset the required tax provision.
The exercise of non-qualified stock options under the Company's stock
options plans give rise to compensation which is includable in the
taxable income of the recipients and deductible by the Company for federal
and state income tax purposes. Utilization of such deductions increased
paid-in capital ($3,334,000 and $3,576,000 during the quarter and six
months ended June 30, 1996 respectively). In accordance with Accounting
Principles Board Opinion No. 25, compensation resulting from increases
in the fair market value of the Company's common stock subsequent to the
date of grant of the applicable exercised stock options is not recognized
as an expense for financial accounting purposes. As of June 30, 1996,
886,007 shares remained issuable upon the exercise of outstanding
non-qualified stock options.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The discussion and analysis below contains trend analysis and other
forward-looking statements. Actual results could differ materially from
those projected in the forward-looking statements as a result of the risk
factors set forth below under "Certain Factors That May Affect Future
Results" and in the Company's other filings with the Securities and
Exchange Commission.
Overview
META Group is an independent market assessment company providing
research and analysis of developments and trends in the computer hardware,
software, communications and related IT industries to IT users and vendors.
IT user organizations utilize META Group's research, analysis and
recommendations to develop and employ cost-effective strategies for
selecting, financing and implementing timely IT solutions. IT vendors
use META Group's services for help in product positioning, marketing and
market planning, as well as for internal IT decision-making.
Continuous Services subscriptions, which are annually renewable
contracts and generally payable by clients in advance, comprised
approximately 85% of the Company's total revenues for the quarter ended
June 30, 1996 as compared to 90% for the quarter ended June 30, 1995.
Billings attributable to the Company's Continuous Services are initially
recorded as deferred revenues and then recognized pro rata over the
contract term. The Company's other revenues are derived from project
consulting, benchmarking, conferences, speaker engagement fees and
publications. The Company's consulting clients typically consist of
Continuous Services clients seeking additional advice tailored to their
individual IT requirements.
One measure of the volume of the Company's business is its annualized
"Contract Value," which the Company calculates as the aggregate annualized
subscription revenue recognized from all Continuous Services contracts in
effect at a given point in time, without regard to the remaining duration of
such contracts. While Contract Value is not necessarily indicative of future
revenues, Contract Value has grown every quarter since the Company's
inception and increased 37% to $34.8 million at June 30, 1996 from $25.4
million at June 30, 1995. At June 30, 1996, the Company had over 2,400
Continuous Services subscribers in 990 client organizations worldwide.
The Company's operating expenses consist of cost of services and
fulfillment, selling and marketing expenses and general and administrative
expenses. Cost of services and fulfillment represents the costs associated
with production and delivery of the Company's products and services and
includes the costs of research, development and preparation of periodic
reports, analyst telephone consultations, executive briefings and
conferences, publications, consulting services, new product development
and all associated editorial and support services. Selling and marketing
expenses include the costs of salaries, commissions and related benefits
for such personnel, travel and promotion. General and administrative
expenses include the costs of the finance and accounting departments,
human resources, corporate IT and other administrative functions
of the Company.
<PAGE>
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
TOTAL REVENUES Total revenues increased 44% to $10.2 million in the quarter
ended June 30, 1996 from $7.1 million in the quarter ended June 30, 1995.
Revenues from Continuous Services increased 37% to $8.7 million in the
quarter ended June 30, 1996 from $6.4 million in the quarter ended
June 30, 1995. The increases in total revenues and revenues from Continuous
Services were primarily due to continued expansion of the Company's domestic
sales force, the expansion of the consulting segment of the business and the
growth in international continuous services. The Company increased Contract
Value 37% to $34.8 million at June 30, 1996 from $25.4 million at
June 30, 1995. The Company grew its subscriber client base 31% to 2,490
Continuous Service clients at June 30, 1996 from 1,900 clients at
June 30, 1995.
Other revenues, consisting principally of revenues from consulting,
increased 106% to $1.5 million in the quarter ended June 30, 1996 from
$727,000 in the quarter ended June 30, 1995, and increased as a
percentage of total revenues to 15% from 10%. The increase in other
revenues was primarily attributable to the expansion of META Group
Consulting activities and the increase in paid attendance at the
Company's major conferences.
Revenues attributable to international clients increased 104% in the
quarter ended June 30, 1996 from the quarter ended June 30, 1995, and
increased as a percentage of total revenues to 25% from 20%. The increase
was equally due to the Company's growth in existing international markets
and to the expansion in the total number of sales representative
organizations. The Company currently has sales representation in 20
countries. The Company expects that international revenues will increase as
a percentage of its total revenues.
COST OF SERVICES AND FULFILLMENT Cost of services and fulfillment increased
24% to $4.9 million in the quarter ended June 30, 1996 from $3.9 million in
the quarter ended June 30, 1995 principally due to increased analyst staffing
and related compensation expense. Cost of services and fulfillment decreased
as a percentage of total revenues to 48% from 55%. This decrease primarily
reflects improvement in the Company's analyst productivity within its core
Continuous Services, as indicated by an increase in the average
client/analyst ratio for these services to 48-to-1 during the quarter ended
June 30, 1996 as compared to a ratio of 41-to-1 during the quarter ended
June 30, 1995. The Company anticipates that the current client to analyst
ratio will decrease slightly as several open analyst positions are filled
during the third and fourth quarters.
SELLING AND MARKETING EXPENSES Selling and marketing expenses increased
46% to $3.1 million in the quarter ended June 30, 1996 from $2.1 million in
the quarter ended June 30, 1995 and remained constant as a percentage of
total revenues at 30%. The increase in expenses was principally due to
increased sales-related compensation expense associated with increased
revenues both domestically and internationally. The Company anticipates
continuing increases in the amount of selling and marketing expenses, and
that such expenses as a percentage of total revenues will increase as the
Company continues to develop international markets for its products.
GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses
increased 51% to $1.1 million in the quarter ended June 30, 1996 from
$756,000 in the quarter ended June 30, 1995 and remained constant as a
percentage of total revenues at 11%. The increase in expenses was
principally due to increased finance, accounting and corporate IT staffing
and expenses relating to the Company's recent initial public offering.
The Company anticipates continuing increases over the prior year in the
amount of general and administrative expenses due in part to expenses related
to being a public company, and expects such expenses to remain constant as a
percentage of total revenues.
DEPRECIATION AND AMORTIZATION Depreciation and amortization expense
increased 64% to $251,000 in the quarter ended June 30, 1996 from $153,000 in
the quarter ended June 30, 1995. The increase in depreciation and
amortization expense was principally due to purchases of computer equipment
and office furniture required to support business growth.
<PAGE>
INTEREST INCOME Interest income, net increased to $454,000 in the quarter
ended June 30, 1996 from $8,000 in the quarter ended June 30, 1995 due to an
increase in the Company's cash balances resulting from the sale of securities
in connection with the Company's initial public offering, a positive cash
flow from operations during the year ended December 31, 1995, and the sale of
Series B Convertible Preferred Stock during 1995.
PROVISION FOR INCOME TAXES During the quarter ended June 30, 1996, the
Company recorded a tax provision of $574,000, reflecting an effective tax
rate of 44%. No tax provision was recorded for the quarter ended
June 30, 1995 since the previously established valuation allowance against
available net operating loss carryforwards was released to offset the
required tax provision.
EARNINGS PER SHARE EPS increased to $.09 per common share for the second
quarter of 1996 as compared to $.08 for the second quarter of 1995 as a
result of increased net income. The Company's weighted average shares
outstanding increased 64% to 8,003,000 shares from 4,894,000 shares in the
second quarter of 1995 as a result of the Company's initial public offering
in December 1995.
SIX MONTHS ENDED JUNE 30,1996 AND 1995
TOTAL REVENUES Total revenues increased 46% to $19.8 million in the six
months ended June 30, 1996 from $13.6 million in the six months ended
June 30, 1995. Revenues from Continuous Services increased 37% to $16.8
million in the six months ended June 30, 1996 from $12.3 million in the six
months ended June 30, 1995. The increases in total revenues and revenues
from Continuous Services were primarily due to continued expansion of the
Company's domestic sales force, the expansion of the consulting segment
of the business and the growth in international Continuous Services.
Other revenues, consisting principally of revenues from consulting,
increased 126% to $2.9 million in the six months ended June 30, 1996 from
$1.3 million in the six months ended June 30, 1995, and increased as a
percentage of total revenues to 15% from 10%. The increase in other
revenues was primarily attributable to the expansion of META Group
Consulting activities and the increase in paid attendance at the Company's
major conferences.
Revenues attributable to international clients increased 104% in the six
months ended June 30, 1996 from the six months ended June 30, 1995, and
increased as a percentage of total revenues to 23% from 20%. The increase
was equally due to the Company's growth in existing international markets
and to the expansion in the total number of sales representative
organizations. The Company currently has sales representation in 20
countries. The Company expects that international revenues will increase as
a percentage of its total revenues.
COST OF SERVICES AND FULFILLMENT Cost of services and fulfillment increased
33% to $9.7 million in the six months ended June 30, 1996 from $7.3 million
in the six months ended June 30, 1995 principally due to increased analyst
staffing and related compensation expense. Cost of services and fulfillment
decreased as a percentage of total revenues to 49% from 54%. This decrease
primarily reflects improvement in the Company's analyst productivity within
its core Continuous Services, as indicated by an increase in the average
client/analyst ratio for these services to 48-to-1 during the six months
ended June 30, 1996 as compared to a ratio of 42-to-1 during the six months
ended June 30, 1995. The Company anticipates that the current client to
analyst ratio will decrease slightly as several open analyst positions are
filled during the next several quarters.
SELLING AND MARKETING EXPENSES Selling and marketing expenses increased
37% to $5.8 million in the six months ended June 30, 1996 from $4.2 million
in the six months ended June 30, 1995 but decreased as a percentage of total
revenues to 29% from 31%. The increase in expenses was principally due to
increased sales-related compensation expense associated with increased
revenues both dometically and internationally. The Company anticipates
continuing increases in the amount of selling and marketing expenses, and
expects that such expenses as a percentage of total revenues will increase
as the Company continues to develop international markets for its products.
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses
increased 59% to $2.2 million in the six months ended June 30, 1996 from
$1.4 million in the six months ended June 30, 1995 and increased as a
percentage of total revenues to 11% from 10%. The increase in expenses was
principally due to increased finance, accounting and corporate IT staffing
and expenses relating to the Company's recent initial public offering. The
Company anticipates continuing increases over the prior year in the amount
of general and administrative expenses due in part to expenses related to
being a public company, and expects such expenses to remain constant as a
percentage of total revenues.
DEPRECIATION AND AMORTIZATION Depreciation and amortization expense
increased 59% to $476,000 in the six months ended June 30, 1996 from $300,000
in the six months ended June 30, 1995. The increase in depreciation and
amortization expense was principally due to purchases of computer equipment
and office furniture required to support business growth.
INTEREST INCOME Interest income, net increased to $918,000 in the six months
ended June 30, 1996 from $29,000 in the six months ended June 30, 1995 due
to an increase in the Company's cash balances resulting from the sale of
securities in connection with the Company's initial public offering, a
positive cash flow from operations during the year ended December 31, 1995
and the sale of Series B Convertible Preferred Stock during 1995.
PROVISION FOR INCOME TAXES During the six months ended June 30, 1996, the
Company recorded a tax provision of $1.1 million, reflecting an effective
tax rate of 43%. No tax provision was recorded for the six months ended
June 30, 1995 since the previously established valuation allowance against
available net operating loss carryforwards was released to offset the
required tax provision.
EARNINGS PER SHARE EPS increased to $.18 per common share for the first
half of 1996 as compared to $.14 for the first half of 1995 as a result of
increased net income. The Company's weighted average shares outstanding
increased 62% to 7,993,000 shares from 4,946,000 shares in the first half
of 1995 as a result of the Company's initial public offering in December 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated $304,000 of cash from operations during the
quarter ended June 30, 1996 compared with $667,000 of cash provided by
operations in the quarter ended June 30, 1995.
The Company generated $134,000 of cash from operations during the six
months ended June 30, 1996 compared with $1.3 million of cash provided by
operations in the six months ended June 30, 1995.
The Company regularly invests excess funds in short-term investments,
such as repurchase agreements, short-term commercial paper and money
market funds.
The Company used $426,000 of cash in the quarter ended June 30, 1996 and
$240,000 in the quarter ended June 30, 1995 for the purchase of furniture,
equipment, computers and related software for use by the Company's employees.
The Company expects that additional purchases of equipment will be made as
the Company's employee base grows. As of June 30, 1996, the Company had no
material commitments for capital expenditures.
The Company used $727,000 of cash in the six months ended June 30, 1996
and $355,000 in the six months ended June 30, 1995 for the purchase of
furniture, equipment, computers and related software for use by the
Company's employees. The Company expects that additional purchases of
equipment will be made as the Company's employee base grows. As of
June 30, 1996, the Company had no material commitments for capital
expenditures.
<PAGE>
In December 1995, the Company received net proceeds (after deducting
underwriting commissions and discounts and applicable offering expenses) of
$30.2 million relating to its initial public offering of 1,860,000 shares of
Common Stock. The Company expects to use the net proceeds for general
corporate purposes, including working capital and product development. A
portion of the net proceeds may also be used for strategic alliances and the
acquisition of businesses, products and technologies that are complementary
to those of the Company.
As of June 30, 1996, the Company had cash and cash equivalents of $35.4
million and working capital of $29.9 million. The Company believes that
existing cash balances and anticipated cash flows from operations will be
sufficient to meet its working capital and capital expenditure requirements
at least through the next twelve months.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company does not provide forecasts of the future financial
performance of the Company. However, from time to time, information
provided by the Company or statements made by its employees may contain
"forward-looking" information that involve risks and uncertainties. In
particular, statements contained in this Form 10-Q that are not historical
facts (including, but not limited to, statements concerning international
revenues, anticipated operating expense levels and such expense levels
relative to the Company's total revenues) constitute forward-looking
statements and are made under the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. The Company's actual results
of operations and financial condition have varied and may in the future
vary significantly from those stated in any forward-looking statements.
Factors that may cause such differences include, without limitation, the
risks, uncertainties and other information discussed below, as well as
the accuracy of the Company's internal estimates of revenue and operation
expense levels. Each of these factors, and others, are discussed from
time to time in the filings made by the Company with the Securities and
Exchange Commission.
The Company's future operating results are subject to substantial risks
and uncertainties. The Company currently derives most of its revenues from
subscriptions to its Continuous Services. As a result, any decline in the
Company's ability to secure subscription renewals may have a material adverse
effect on the Company's results of operations. The Company's ability to
secure subscription renewals, as well as to successfully market and sell its
consulting services, is dependent upon the Company's ability to deliver
consistent, high-quality and timely analysis and advice with respect to
issues, developments and trends that clients view as important. The
Company's successful delivery of such analysis and advice is, in turn,
dependent upon many factors, including, among other things: its ability to
recruit and retain highly talented professionals in a competitive job market,
to understand and anticipate rapidly changing technologies and market trends
so as to keep its analysis focused on the changing needs of its clients, and
to deliver products and services of sufficiently high quality and timeliness
to withstand competition from competitors which may have greater financial,
information gathering and marketing resources than the Company. The
Company's ability to market and sell its products and services could also be
adversely affected by the emergence of new competitors into one or more of
the market segments addressed by the Company's products and services, which
could cause pricing pressure and loss of market share. In addition, a
significant portion of the Company's revenues are attributable to
international clients, which may be adversely affected by factors including
difficulties in developing and managing relationships with international
sales representative organizations, reliance on sales entities which the
Company does not control, greater difficulty in maintaining direct client
contact, fluctuations in exchange rates, adverse political and economic
conditions, tariffs and other trade barriers, longer accounts receivable
collection cycles and adverse tax consequences. The Company's future
financial results also depend in part on the development or acquisition of
new products and services, which may not successfully be achieved due to the
inherent costs and risks associated with development, assimilation and
marketing of a new product or service, as well as the Company's limited
experience in introducing new products and services.
<PAGE>
Furthermore, the Company's quarterly operating results may fluctuate
significantly due to various factors. Since a disproportionately large
portion of the Company's Continuous Services contracts expire in the fourth
quarter of each year, the Company incurs operating expenses in the fourth
quarter at a higher level than would otherwise be required by its sequential
growth, and such increased expenses are not normally offset immediately by
higher revenues. In addition, the Company's operating results may fluctuate
as a result of a variety of other factors, including the level and timing of
renewals of subscriptions to Continuous Services, the timing and amount of
business generated by the Company, the mix of domestic versus international
business, the timing of the development, introduction and marketing of new
products and services, the timing of the hiring of research analysts,
changes in the spending patterns of the Company's target clients, changes in
market demand for IT research and analysis and competitive conditions in the
industry. Due to these factors, the Company believes period-to-period
comparisons of results of operations are not necessarily meaningful and
should not be relied upon as an indication of future results of operations.
The potential fluctuations in the Company's operating results make it likely
that, in some future quarter, the Company's operating results will be below
the expectations of securities analysts and investors, which would have a
material adverse effect on the price of the Company's Common Stock.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
As disclosed in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, in November, 1995, a complaint was filed in the
Bridgeport Judicial District of the Superior Court of Connecticut by a former
consultant to the Company naming the Company and its Chief Executive Officer
as defendants. There have been no material developments in this matter
during the quarter ended June 30, 1996.
The Company is a party to certain other legal proceedings.
However, the Company believes that none of these proceedings is likely to
have a material adverse effect on the Company's business, results of
operations or financial condition.
Item 4. Submission of Matters to a Vote of Security-Holers.
On May 20, 1996, the Company held its Annual Meeting of Stockholders, at
which the stockholders of the Company voted on the election of two Class I
Directors to serve for a three-year term or until successors are elected and
qualified. The number of votes cast for the re-election of each of the
Class I Directors listed below was as follows:
<TABLE>
<CAPTION>
Nominees Number of Shares
- - -------- For Withold Authority
--- -----------------
<S> <C> <C>
Dale Kutnick 3,045,646 39,106
Francis J. Saldutti 2,512,621 572,221
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit
Number Description
------ ----------------------------------------------
11.1 Statement re-computation of per-share earnings
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed by the Company for
the quarter ending June 30, 1996.
<PAGE>
SIGNATURE
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.
META Group, Inc.
Date: August 12, 1996 By:/s/ Bernard F. Denoyer
Bernard F. Denoyer
Vice President, Finance, Chief
Financial Officer, Secretary and
Treasurer (Principal Financial
and Accounting Officer)
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
- - ------- --------------------------------------------- -------------
11.1 Statement re computation of per-share earnings 16
27.1 Financial Data Schedule 17
<PAGE>
EXHIBIT 11.1
META Group, Inc.
EXHIBIT TO ANNUAL REPORT ON FORM 10-Q
Compution of Net Income Per Common Share
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
1996 1995 1996 1995
------------------------ ----------------------
<S> <C> <C> <C> <C>
Net income $731,000 $393,000 $1,450,000 $668,000
======== ======== ========== ========
Weighted average number
of common and common
equivalent shares outstanding:
Average number of common shares
outstanding during the period 5,757,886 2,403,283 5,655,394 2,405,720
Add common share equivalents --
options to purchase common
shares 2,245,209 2,490,619 2,337,682 2,540,637
-------- -------- --------- ---------
Total common shares
outstanding 8,003,095 4,893,902 7,993,076 4,946,357
========= ========= ========= =========
Net income per common share $.09 $.08 $.18 $.14
==== ==== ==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> APR-01-1996 JAN-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 0 35,413
<SECURITIES> 0 0
<RECEIVABLES> 0 11,348
<ALLOWANCES> 0 (297)
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 48,459
<PP&E> 0 3,439
<DEPRECIATION> 0 (1,520)
<TOTAL-ASSETS> 0 55,926
<CURRENT-LIABILITIES> 0 18,551
<BONDS> 0 0
0 0
0 0
<COMMON> 0 66
<OTHER-SE> 0 37,309
<TOTAL-LIABILITY-AND-EQUITY> 0 55,926
<SALES> 0 0
<TOTAL-REVENUES> 10,204 19,775
<CGS> 4,875 9,672
<TOTAL-COSTS> 4,875 9,672
<OTHER-EXPENSES> 4,478 8,474
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 16 16
<INCOME-PRETAX> 1,305 2,547
<INCOME-TAX> (574) (1,097)
<INCOME-CONTINUING> 731 1,450
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 731 1,450
<EPS-PRIMARY> .09 .18
<EPS-DILUTED> .09 .18
</TABLE>
