UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended May 31, 1998
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: 2-91525-NY
MARKET GUIDE INC.
(Exact name of Registrant as specified in its charter)
New York 11-2646081
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2001 Marcus Avenue
Suite South 200
Lake Success, New York 11042-1011
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,including area code: (516) 327-2400
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _______
4,758,204 Common shares, $.001 par value were issued and outstanding on July 8,
1998.
<PAGE>
Table of Contents
Financial Statements
Balance Sheets as of May 31, 1998 (Unaudited) and February 28, 1998 3
Statement of Operations for the Three Months Ended May 31, 1998
(Unaudited) and May 31, 1997 (Unaudited) 5
Statement of Cash Flows for the Three Months Ended
May 31, 1998 (Unaudited) and May 31, 1997 (Unaudited) 6
Notes to Financial Statements 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations May 31, 1998 9
Other Information 17
Signature 18
<PAGE>
MARKET GUIDE INC.
Balance Sheets
<TABLE>
<CAPTION>
May 31, February 28,
1998 1998
--------------------- ------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 964,988 $ 809,618
Accounts receivable (net of allowance
or doubtful accounts) 1,255,892 1,047,449
Prepaid expenses and other current assets 117,251 114,985
--------------------- ------------------
Total current assets 2,338,131 1,972,052
Property, plant and equipment:
Furniture and equipment 1,835,322 1,623,206
Equipment held under capital leases 942,950 942,950
Leasehold improvements 81,239 80,990
--------------------- ------------------
2,859,511 2,647,146
Less: Accumulated depreciation and amortization
(including amortization of capital leases totaling
$412,204 and $367,610 as of May 31, 1998 and
February 28, 1998, respectively) 1,231,011 1,117,876
--------------------- ------------------
Net property, plant and equipment 1,628,500 1,529,270
Other assets:
Computer software and product enhancements
(net of accumulated amortization) 2,859,462 2,780,128
Deposits and other assets 78,084 78,084
--------------------- ------------------
Total other assets 2,937,546 2,858,212
--------------------- ------------------
Total assets $ 6,904,177 $ 6,359,534
===================== ==================
</TABLE>
<PAGE>
<TABLE>
MARKET GUIDE INC.
Balance Sheets - continued
<CAPTION>
May 31, February 28,
1998 1998
-------------------- ---------------------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Current maturities of long-term debt and capital
leases $ 319,050 $ 274,031
Unearned revenues 1,193,086 999,949
Accounts payable and other accrued expenses 269,951 218,618
--------------------- ------------------
Total current liabilities 1,782,087 1,492,598
Non-current liabilities:
Long-term debt and capital lease obligations,
less current maturities 667,135 761,981
--------------------- ------------------
Total non-current liabilities 667,135 761,981
Commitments -0- -0-
--------------------- ------------------
Total liabilities 2,449,222 2,254,579
Stockholders' equity:
Common stock - $.001 par value; 20,000,000 shares authorized,
4,758,204 and 4,723,594 shares issued and outstanding as of
May 31, 1998 and February 28, 1998, respectively. 4,758 4,723
Capital in excess of par value 5,142,928 5,010,134
Accumulated deficit (692,731) (909,902)
---------------------
------------------
Total stockholders' equity 4,454,955 4,104,955
--------------------- ------------------
Total liabilities and stockholders' equity $ 6,904,177 $ 6,359,534
===================== ==================
</TABLE>
<PAGE>
MARKET GUIDE INC.
Statement of Operations
(Unaudited)
<TABLE>
For the 3 Months Ended
------------------------------------------------------
<CAPTION>
May 31, May 31,
1998 1997
--------------------- -------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues:
Database vendors $ 1,409,932 $ 1,171,402
Market Guide products 833,119 258,861
Print product 10,894 15,750
--------------------- -------------------
Total revenues 2,253,945 1,446,013
Expenses:
Salaries, payroll taxes & employee benefits 1,218,703 923,398
Database and product costs 138,660 102,397
General and administrative 342,085 229,309
Depreciation 113,135 83,367
Amortization 111,631 92,029
Advertising and promotion 87,501 77,465
--------------------- -------------------
Total expenses 2,011,715 1,507,965
--------------------- -------------------
Income from operations 242,230 (61,952)
Interest income 4,864 8,161
Interest expense 25,206 20,738
--------------------- -------------------
Income before income taxes 221,888 (74,529)
Provision for income taxes 4,719 -0-
--------------------- -------------------
Net income $ 217,169 $ (74,529)
===================== ===================
Earnings per share:
Basic $ 0.05 $ (0.02)
Diluted $ 0.04 $ (0.02)
Weighted average number of shares outstanding:
Basic 4,735,144 4,708,203
Diluted 4,977,787 4,733,203
</TABLE>
<PAGE>
<TABLE>
MARKET GUIDE INC.
Statements of Cash Flows
(Unaudited)
<CAPTION>
For the 3 Months Ended
--------------------------------------------------------
May 31, May 31,
1998 1997
---------------------- -------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net income $ 217,169 $ (74,529)
---------------------- -------------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 224,766 175,397
Changes in assets and liabilities:
(Increase)/Decrease in accounts receivable (208,443) (164,140)
(Increase)/Decrease in prepaid assets (2,266) 154,740
Increase/(Decrease) in accounts payable 51,333 9,591
Increase/(Decrease) in unearned revenues 193,137 214,001
---------------------- -------------------
Total adjustments 258,527 389,589
---------------------- -------------------
Net cash provided by operating activities 475,696 315,060
---------------------- -------------------
Cash Flows From Investing Activities:
Payments for purchase of fixed assets (212,116) (226,181)
Payments for leasehold improvements (249) (2,117)
Development of computer software and
product enhancements (190,965) (372,843)
---------------------- -------------------
Net cash used by investing activities (403,330) (601,141)
---------------------- -------------------
Cash Flows From Financing Activities:
Payments for capital leases and equipment line of credit (49,825) (44,987)
Proceeds from issuance of employee's stock plan 57,829 3,995
Proceeds from stock options exercised 75,000 -0-
---------------------- -------------------
Net cash provided by financing activities 83,004 (40,992)
---------------------- -------------------
Net increase/(decrease) in cash 155,370 (327,073)
Cash at beginning of period 809,618 1,230,893
---------------------- -------------------
Cash at end of period $ 964,988 $ 903,820
====================== ===================
</TABLE>
<PAGE>
Market Guide Inc.
Notes to Financial Statements
May 31, 1998
Note 1 INTERIM FINANCIAL STATEMENTS
The accompanying financial statements of Market Guide Inc. have been prepared
without audit, except for the balance sheet as of February 28, 1998. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three months ended May 31, 1998 are not necessarily
indicative of the results that may be expected for the year ending February 28,
1999.
Note 2 BANK LINE OF CREDIT
On September 1, 1997, the Company and Fleet Bank extended the line of credit for
an additional year with all the original terms and conditions remaining in
effect. The line of credit extension expires on August 31, 1998.
During the first quarter ended May 31, 1998, the Company did not borrow any
funds under its line of credit with Fleet Bank. As of May 31, 1998, the Company
had borrowed a total of $471,750 for the purpose of funding acquisitions of
capital equipment (principally computers and peripherals). The bank line was
used in lieu of alternative leasing arrangements used in the past.
Note 3 DEPRECIATION AND AMORTIZATION
Depreciation and amortization are provided for in amounts sufficient to relate
the cost of depreciable assets to operations over their estimated service lives.
Leased property under capital leases is amortized over the lives of the
respective leases or over the service lives of the assets for those leases which
substantially transfer ownership. The straight-line method of depreciation is
followed for substantially all assets for both financial and tax reporting
purposes.
Note 4 YEAR 2000 COMPLIANCE
The Company is currently conducting a comprehensive review of its computer
systems and software to assess its exposure to Year 2000 issues. Based upon a
preliminary assessment, management believes the Company's systems are compliant
or will be compliant by the end of 1998. All maintenance and modification costs
are being expensed as incurred. The costs associated with Year 2000 compliance
have not been, nor are they anticipated to be, material to the Company's
financial position or results of operations.
Note 5 OPERATING SEGMENTS
For the purpose of determining operating segments, Market Guide separated
CreditRisk Monitor (formed in September 1996) from Market Guide.
The Market Guide segment consists of sales made to the Institutional, Broker and
Trader (Retail), and Individual Investor marketplaces, as well as revenues
generated from a print product, customized screens, data and report sales to the
corporate and institutional marketplaces and direct sales on the internet.
The CreditRisk Monitor (CRM) segment includes all business derived from selling
the CreditRisk Monitor service on the Internet (www.creditriskmonitor.com). The
CRM service is a subscription-based credit monitoring service targeted towards
the corporate credit manager. This business differs from Market Guide's core
business which remains selling reports and data to the Institutional, Broker and
Trader and Individual Investor marketplaces. Therefore, management has decided
to treat CRM as a separate operating entity and to evaluate its financial
performance based on expenses that are directly attributable to its division.
There has been no allocation of Market Guide data or personnel costs to CRM in
the segment analysis.
<TABLE>
<CAPTION>
3 months ended May 31, 1998 3 months ended May 31, 1997
--------------------------- ---------------------------
CreditRisk Market Guide Consolidated CreditRisk Market Guide Consolidated
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Database vendor $ -0- $ 1,409,932 $ 1,409,932 $ -0- $ 1,171,402 $ 1,171,402
Market Guide products 193,015 640,104 833,119 10,629 248,232 258,861
Print products -0- 10,894 10,894 -0- 15,750 15,750
Total revenues 193,015 2,060,930 2,253,945 10,629 1,435,384 1,446,013
Expenses:
Salaries & benefits 274,266 944,437 1,218,703 65,628 857,770 923,398
Database & product 37,404 101,256 138,660 4,734 97,663 102,397
costs
General & admin. 28,945 313,140 342,085 17,911 211,398 229,309
Depreciation 12,385 100,750 113,135 6,346 77,021 83,367
Amortization 19,620 92,011 111,631 13,080 78,949 92,029
Advertising & promo. 39,230 48,271 87,501 49,606 27,859 77,465
Total expenses 411,850 1,599,865 2,011,715 157,305 1,350,660 1,507,965
Operating income (loss) $ (218,835) $ 461,065 $ 242,230 $ (146,676) $ 84,724 $ (61,952)
Accounts receivable $ 335,915 $ 919,977 $ 1,255,892 $ 84,114 $ 637,441 $ 721,555
Prop., plant & equip., net 207,765 1,420,736 1,628,500 132,471 1,219,464 1,351,935
Capitalized assets, net 496,641 2,362,821 2,859,462 512,364 1,660,071 2,172,434
Unearned revenue 616,331 576,755 1,193,086 80,870 381,810 462,680
</TABLE>
<PAGE>
Market Guide Inc.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
May 31, 1998
Business
Market Guide Inc. was incorporated in the State of New York on March 23, 1983 as
"The Unlisted Market Service Corporation." On September 3, 1986 the current
corporate name was adopted. In 1996, the Company formed a new division,
CreditRisk Monitor, to develop services for the corporate credit manager.
The Company acquires, integrates, condenses and publishes accurate, timely, and
objective financial and other information on publicly traded corporations, and
markets this information to the financial, investment and credit communities, as
well as to independent investors through the Internet (www.marketguide.com) and
other distribution channels in a cost effective manner.
The Market Guide Database covers over 10,500 companies traded on the New York
Stock Exchange, American Stock Exchange, Nasdaq and Over-the-Counter Stock
Markets, including foreign companies trading in the U.S. as ADRs and ADSs. The
content created by Market Guide is derived from information filed by the subject
company with the Securities and Exchange Commission, issued in press releases or
carried in other media reports. Each company's information is updated at least
four and often more than eight times a year, as soon as relevant information
becomes available. Pricing and trading volume information incorporated into the
database are updated daily, and short interest statistics are updated monthly.
Market Guide adds value, distinguishes itself from the competition, and serves
its clients through its:
Flexible database design which gives users important insights not
available in competitive databases, thereby enabling them to make
better informed investment decisions;
Inclusion of auxiliary information such as earnings estimates, price
performance, relative price performance, summary insider and
institutional ownership statistics, bond ratings, and short interest
statistics giving users a complete perspective on each company;
Calculation of over 500 popular financial ratios, growth rates, and
averages computed for the user's convenience;
Carefully planned, market tested display formats, including company
to industry comparisons, that allow users to quickly and efficiently
make carefully considered investment and credit decisions; and
Developing efficient, timely, cost-effective and easy to use software
delivery systems such as Market Guide for Windows, our Internet site
(www.marketguide.com) and the CreditRisk Monitor site
(www.creditriskmonitor.com).
The targeted markets for Market Guide's data and related products include
investment managers, investment research departments, financial planners,
investment counselors, investment bankers, banks, stockbrokers and brokerage
firms, traders, libraries, publications, corporations, law firms and individual
investors. The Company sells its information through four channels: information
vendors, the Internet, Market Guide for Windows (its proprietary analytic
software) and a print publication. The CreditRisk Monitor division serves the
need of corporate credit managers through an Internet based service.
<PAGE>
Vendors
Market Guide works in partnership with financial information service vendors.
The financial information service vendors combine data from various real-time
and historical information sources with their own analytic software and data
delivery capability. Their sales forces sell the product and they also provide
customer training and support services. Market Guide focuses on developing the
highest quality information content and leveraging off the information vendor's
sales force, software, information dissemination infrastructure and customer
base. The amount of data presented, its display format, and the software's
analytic capabilities vary depending upon the way each information provider
defines its customers' needs, software capabilities, distribution technologies
and preferred pricing strategies.
Information service vendors that currently distribute the Market Guide Database
include: Accutrade; AltaVista; America Online; American Association of
Individual Investors; Ameritrade; Argus Research; Automatic Data Processing; AIQ
Systems, Inc.; Bridge Information Systems Inc.; Business Wire, Inc.; Charles
Schwab and Company; Charter Media; Data Broadcasting Corporation; Dow Jones
Markets; FactSet Research Systems, Inc.; First Call Corporation; Global Market
Information; Holt Value Associates; Horsesmouth LLC; ILX Systems Inc.;
Individual Investor Group; InfoSpace Inc.; Instinet Analytics; Interactive Data
Corporation; Internet Securities, LLC; Lycos; News Alert, Inc; OneSource
Information Services, Inc.; P.C. Quote, Inc.; Pointcast; Prodigy Services
Company; Quote.com; Quotes Plus; Quotron Systems, Inc.; Real Time Quotes, Inc.;
Reality Online; Reuters PLC; Securities Data Corporation; Shark Information
Services, Inc.; Siebel Systems, Inc.; Telemet America, Inc.; Telescan, Inc.;
Track Data Corporation; Vickers Stock Research Corporation; Waterhouse
Securities, Inc.; Windows on Wall Street; and Yahoo!.
In April 1998, Market Guide's information was introduced on America Online, and
in May 1998, on Alta Vista.
Business Developments
In August 1995, the Company announced an agreement with the American Association
of Individual Investors (AAII) whereby AAII will incorporate Market Guide's
information in their existing screening software known as Stock Investor. AAII
is an educational not for profit corporation with over 100,000 members, a small
percentage of whom subscribe to Stock Investor. Market Guide's information first
appeared with Stock Investor's regular quarterly update in November 1995.
Market Guide's analytic software package, Market Guide for Windows (MGW), was
introduced in fiscal year 1996. This product permits users to search the
database, develop user defined reports and download information to popular
spreadsheet software packages. The software is not patented or trademarked, but
a copyright is claimed by the Company. Market Guide for Windows is delivered on
a CD/ROM with weekly, monthly or quarterly updates.
In June 1996, the Company announced a multi-year contract with Reuters Limited
which grants Reuters' worldwide use of Market Guide's financial database. To
date, this agreement represents the largest single contract in Market Guide's
history.
The Company has an Internet site that has been in operation since the second
quarter of fiscal 1997. It is anticipated that this site will broaden the
Company's ability to sell and service its products directly to end users. The
address to our site is http://www.marketguide.com. The Company also uses its
Internet infrastructure to host co-branded sites and to work in partnership with
various vendors. In addition to distributing the information through many
Internet based services, Market Guide also hosts co-branded sites for brokerage
firms such as Ameritrade and Charles Schwab, as well as search engines including
Yahoo!.
The same Market Guide for Windows software with a smaller information set is
sold over the Internet to individual investors under the name StockQuest.
StockQuest was introduced in August 1996.
Also in August 1996, the Company formed a new division, CreditRisk Monitor
("CRM"). CRM is an Internet-based financial information and real-time news
service targeted towards the corporate credit function. After seven months of
development work, the CreditRisk Monitor service was successfully introduced in
April 1997.
In April 1998, Market Guide's information became available on America Online
("AOL"), where it is an important part of the AOL Investment Research area. On
America Online, Market Guide gets compensated by a percentage of advertising
revenues and the ability to sell users additional content on a subscription or
per report basis.
Publications
The Company's quarterly print product, The Market Guide - Select Over the
Counter Stock Edition, is a single volume of 800 one-page reports on fast
growing, profitable over-the-counter companies. Each quarterly book features a
somewhat different set of 800 companies. The book also has a detailed company
index listing 15 key statistics on each company in a tabular format.
This index is very useful to investors searching for attractive investment
opportunities.
Market Guide attempts to provide continuity of coverage so that subscribers to
the book can keep following companies in which they have an interest. However,
from time-to-time the companies covered do change. The most common reasons for
deletion of coverage are:
The company has been acquired in a merger or a leveraged buyout;
The company has not filed a financial statement with the Securities
and Exchange Commission for two or more reporting periods;
The company has exhibited significant deterioration in its financial condition;
The company has been deleted from the National Association of Security
Dealers Automatic Quotation System (Nasdaq) and has fewer than three
Market Makers;
The company now trades on the New York or American Stock Exchange, and no
longer qualifies for the OTC edition.
Companies dropped from the book are replaced by companies which are selected by
using proprietary Market Guide selection criteria. The companies in the book
have regularly outperformed the Nasdaq composite.
Database Enhancements
The Company continuously expands, enhances and improves the Market Guide
Database and related software capabilities based in part upon customer
suggestions and employee feedback. In 1988, the Company added the New York and
American Stock Exchange companies to its then current universe of Nasdaq and
"pink sheet" companies.
In 1990, Market Guide decided to expand the database to include complete
detailed quarterly financial statements. The Company engaged in a series of
dialogues with current or potential vendors and customers to determine the
market potential, to identify the Company's perceived strengths and weaknesses,
and to research market needs and the appropriateness of the Company's
methodologies and objectives. The results of this analysis were the commitment
of resources to more than double the amount of information collected and
maintained on each subject company. In fiscal years 1990, 1991 and 1992 the
Company added the Annual Statement of Cash Flows and complete Quarterly Income
Statements, Balance Sheets and Statements of Cash Flows on all the companies in
the database. This has allowed Market Guide to serve new markets and to bid on
services for which Market Guide did not previously qualify.
In late 1993 the Company began to track short interest information published
monthly by U.S. stock exchanges and markets.
In early 1994 the Company began subscribing to and processing the Securities and
Exchange Commission's (SEC's) Electronic Data Gathering Analysis and Reporting
(EDGAR) service. This permitted access to source documents (10-Ks, 10-Qs, etc.)
ten days to two weeks earlier than in previous years. Record levels of
timeliness for the Market Guide Database have subsequently been attained.
In the fall of 1994, Market Guide introduced completely new industry and sector
classifications that reflect the current economy and are being incorporated into
all of Market Guide's products.
These industry and sector classifications will help investors:
Identify which industries and sectors are outperforming the market or have
fallen from favor;
Compare companies to a well-defined peer group;
Analyze and review industry and sector financial and investment
characteristics;
Properly construct portfolios to ensure adequate diversification; and
Make well reasoned asset allocation decisions.
In the fall of 1995, the Company completed development of a historical pricing
database to complement the financial information it has compiled. The pricing
database contains both historical and current information for all issues trading
on the New York and American Stock Exchanges, the Nasdaq Stock Market, and
selected OTC Bulletin Board and Pink Sheet Companies. The Market Guide pricing
database contains Open, High, Low, Close and Volume information on a daily basis
beginning in 1983, with daily updates occurring each trading day.
In order to satisfy institutional investors' needs for extensive historical
financial information, Market Guide increased the number of years of historical
annual financial statements in the Market Guide database. With the culmination
of the "Big Ten" project, Market Guide now has annual financial statement data
going back to 1983 for most companies on its database. As a result of the "Big
Ten" project, Market Guide is now able to compete for other business where at
least ten years of historical data is required. This information is currently
being distributed within the OneSource US Equities product, the Market Guide for
Windows product, and through selected vendors.
In fiscal year 1997, the Company began collecting information on Dividend
Reinvestment Plans (DRIPs). The DRIP information Market Guide collects includes
restrictions, fees, discounts and company contacts on over 900 plans. The
Company will continue to expand its DRIP database as more companies sponsor such
plans.
In fiscal year 1997, the Company incorporated Senior Debt Ratings into its
database. The debt ratings offered on the Market Guide Database are provided by
Fitch Investors Service, LP; Moody's Investors Service; and Standard & Poor's
Rating Group. Ratings data includes current ratings, prior ratings, and the
accompanying dates. Using these ratings, Market Guide has constructed average
company and industry ratings information.
Internet
The Company has created a dynamic, comprehensive and extremely useful Internet
site. The site contains both advertising supported and added cost content.
Advertising supported content is free to the user and Market Guide expects to
cover its costs and generate profits from the sale of advertising. As of May
1998, the advertising supported content included:
Real time price quotes;
Market commentary (in partnership with Briefing);
News (in partnership with News Alert);
Market Guide's Company Snapshot Report;
Market Guide's Performance Report;
Market Guide's Financial Highlights Report;
Market Guide's What's Hot/What's Not service that identifies the price
performing leaders and laggards by sector, industry and company over
various time periods;
NetScreen (an online stock screen application); and Price charts (in
partnership with Neural Applications Corp.)
For users who wish to have more comprehensive information, added cost content is
available for nominal per report or subscription based fees. The added cost
content includes:
The Market Guide Ratio Comparison Report;
The Market Guide Select Financial Statements;
The Market Guide ProVestor Plus Report;
The Earnings Estimate Report (in partnership with First Call); and Market
Guide StockQuest Screening Software and Reporting applications.
In addition to our own site, Market Guide's information is available on more
than 40 other web sites. Most of these web partners also offer their users added
cost services from Market Guide. These added cost services are delivered mostly
through co-branded sites hosted by Market Guide.
CreditRisk Monitor
Market Guide's newest division, CreditRisk Monitor (CRM), is a new online
information and news service that follows approximately 550 U.S. publicly held
domestic retail chains and wholesalers. This online service is accessible
through the Internet (www.creditriskmonitor.com) and has been designed to
provide corporate credit managers with the analytical tools necessary to analyze
and follow, on a daily basis, all the public companies they do business with.
CRM was formed specifically to leverage Market Guide's comprehensive database
and state-of-the-art technology through sales to a new market. CRM provides the
credit community with a cost efficient, online credit and financial information
service.
The CRM information service consists of: CRM Company Reports, the CRM Alert
Notification Service and the CRM Real-Time News Service. The CRM web site became
operational in April 1997.
<PAGE>
Business Facilities
In October 1994, the Company relocated its principal place of business to new
headquarters in Lake Success, New York. Lake Success is located on the Queens
(New York City) - Nassau County (Long Island) border. The Company currently
maintains two office suites in this complex, Suite South 200 which totals 13,500
square feet, and Suite West 290 which totals 5,500 square feet.
In June 1996, the Company leased a sales office in Chicago, Illinois. This space
totals 572 square feet and is staffed by a full time sales representative. This
office was closed in May, 1998.
Results of Operations
For the three months ended May 31, 1998 compared to May 31, 1997
Total revenues for three months ended May 31, 1998 increased 56% to $2,253,945
from $1,446,013 for the three months ended May 31, 1997. The growth in revenues
reflects a 20% increase to $1,409,932 in database vendor sales and a 222% rise
to $833,119 in Market Guide product sales.
Market Guide's largest component of sales through its vendor channels
contributed to corporate growth as its vendors continued to enhance their
services, create new products and aggressively market them to end users. Market
Guide for WindowsTM sales accounted for approximately 5% of total revenue in the
current quarter and Market Guide recorded its one hundredth customer sale in the
quarter. The CreditRisk Monitor client roster increased steadily in the quarter
to approximately 300 companies. Although this new division has not yet achieved
profitability, CreditRisk Monitor sales had grown to almost 9% of total first
quarter revenues.
Internet based revenues grew the fastest and continued to represent a growing
percentage of Market Guide's total revenue. This reflects the servicing of over
forty Internet redistribution agreements and increased advertising fees
generated at Market Guide's web site (www.marketguide.com). Internet revenues
would have been even higher had Market Guide not made its web site free to
all users for the month of May 1998. This promotion has proved successful
and has been extended through July 1998.
Total operating expenses for three months ended May 31, 1998 increased 33% to
$2,011,715 from $1,507,965 in the three months ended May 31, 1997. The increase
in operating expenses reflects Market Guide's continuing investment in its
Internet effort and its CreditRisk Monitor division. For the quarter ended May
1998, CreditRisk Monitor resulted in an operating loss of approximately
$219,000.
Income from operations for three months ended May 31, 1998 totaled $242,230
compared to an operating loss of $61,952 in the three months ended May 31, 1997.
The improvement in income from operations reflects increased sales to new and
existing customers as well as tight cost control measures.
Interest income for three months ended May 31, 1998 decreased 40% to $4,864.
The decrease reflects lower cash balances in the first half of the quarter.
Interest expense for three months ended May 31, 1998 increased 22% to $25,206.
Higher interest expense reflects additional capital lease service requirements.
The increase in interest expense reflects costs associated with the Fleet line
of credit.
Net income for the three months ended May 31, 1998 totaled $217,169 compared
to a net loss of $74,529 in the three months ended May 31, 1997.
Liquidity and Capital Resources
As of May 31, 1998, the Company's working capital (current assets less current
liabilities) increased 16% to $556,044 from $479,454 as of February 28, 1998.
The Company's cash and cash equivalents increased 19% to $964,988 from $809,618
as of February 28, 1998.
For the three months ended May 31, 1998, net cash provided by operating
activities increased 51% to $475,696. The increase reflects $217,169 in net
income versus a loss of $74,529 in May, 1997 and higher depreciation and
amortization expenses.
For the three months ended May 31, 1998, net cash used in investing activities
decreased 33% to $403,330. The decrease reflects the Company's reduction in
capitalized projects due to the completion of several projects.
For the three months ended May 31, 1998, net cash from financing activities
totaled $83,004 compared to net cash used in financing activities totaling
$40,992 in the three months ended May 31, 1997. This was due to the proceeds of
the employees' stock purchase plan and the exercising of stock incentive
options.
The Company did not engage in any borrowing during the first quarter.
The Company believes its current liquidity is sufficient to meet its obligations
during the next twelve months.
<PAGE>
Other Information
Item 1 Legal Proceeding
In December 1996, the Company commenced litigation in the United States District
Court for the Eastern District of New York against Information Clearinghouse,
Inc. d/b/a F&D Reports (ICI) and Lawrence Sarf. The Company's complaint alleges
claims of trademark infringement, unfair competition, deceptive trade practices
and conversion in connection with the defendant's theft and use of the Company's
proprietary slogan, "On-Line, On-Time, On-Target," developed for use with its
Internet based credit reporting service, CreditRisk Monitor. Market Guide seeks
damages in an amount exceeding $5 million, plus injunctive and declaratory
relief. ICI has filed an Answer responding to the Complaint and denying all
material allegations. Discovery has been completed, and a final pretrial
conference is scheduled, before the Court, on July 28, 1998.
ICI has commenced a separate action in state court against three former ICI
employees, Market Guide and individual Market Guide employees arising from use
of alleged trade secret information. ICI has asserted claims under New York
common law seeking injunctive relief and monetary damages in the estimated
amount of $4.3 million. The Company has denied all material allegations from the
outset of this suit, and the Company intends to continue its vigorous defense of
ICI's claims. At the outset of the case, ICI moved for injunctive relief and
Market Guide moved to dismiss all claims. The Court denied ICI's request for
injunctive relief and the Company's motion. Deposition discovery is underway,
and is scheduled to be completed by September 14, 1998.
Item 2 Changes in Securities None
Item 3 Defaults Upon Senior Securities None
Item 4 Submission of Matters to Vote of Security Holders None
Item 5 Exhibits and Reports on Form 8-K None
<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.
MARKET GUIDE INC.
(Registrant)
July 14, 1998 /s/ Homi M. Byramji
Date HOMI M. BYRAMJI
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