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 August 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 _______
4,764,784 Common shares, $.001 par value were
issued and outstanding on October 6, 1998.
<PAGE>
Table of Contents
Financial Statements
Balance Sheets as of August 31, 1998 (Unaudited)
and February 28, 1998 3
Statement of Operations for the Three Months
and Six Months Ended August 31, 1998
(Unaudited) and August 31, 1997 (Unaudited) 5
Statement of Cash Flows for the Six Months
Ended August 31, 1998 (Unaudited)
and August 31, 1997 (Unaudited) 6
Notes to Financial Statements 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations August 31, 1998 9
Other Information 18
Signature 19
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MARKET GUIDE INC.
Balance Sheets
<CAPTION>
<S> <C> <C>
August 31, February 28,
1998 1998
--------------------- ------------------------
(Unaudited)
ASSETS
Current assets:
Cash $ 1,032,760 $ 809,618
Accounts receivable (net of allowance
for doubtful accounts) 1,395,553 1,047,449
Prepaid expenses and other current assets 296,795 114,985
--------------------- ------------------
Total current assets 2,725,108 1,972,052
Property, plant and equipment:
Furniture and equipment 2,031,368 1,623,206
Equipment held under capital leases 942,950 942,950
Leasehold improvements 91,605 80,990
--------------------- ------------------
3,065,923 2,647,146
Less: Accumulated depreciation and amortization
(including amortization of capital leases totaling
$456,798 and $367,610 as of August 31, 1998 and
February 28, 1998, respectively) 1,353,159 1,117,876
--------------------- ------------------
Net property, plant and equipment 1,712,764 1,529,270
Other assets:
Computer software and product enhancements
(net of accumulated amortization) 2,831,688 2,780,128
Deposits and other assets 78,084 78,084
--------------------- ------------------
Total other assets 2,909,772 2,858,212
--------------------- ------------------
Total assets $ 7,347,644 $ 6,359,534
===================== ==================
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<CAPTION>
MARKET GUIDE INC.
Balance Sheets - continued
<S> <C> <C>
August 31, February 28,
1998 1998
-------------------- --------------------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Current maturities of long-term debt and capital
leases $ 364,090 $ 274,031
Unearned revenues 1,439,174 999,949
Accounts payable and other accrued expenses 324,862 218,618
--------------------- ------------------
Total current liabilities 2,128,126 1,492,598
Non-current liabilities:
Long-term debt and capital lease obligations,
less current maturities 573,912 761,981
--------------------- ------------------
Total non-current liabilities 573,912 761,981
Commitments -0- -0-
--------------------- ------------------
Total liabilities 2,702,038 2,254,579
Stockholders' equity:
Common stock - $.001 par value; 20,000,000 shares
authorized, 4,764,784 and 4,723,594 shares issued
and outstanding as of August 31, 1998 and February 28,
1998, respectively. 4,764 4,723
Capital in excess of par value 5,172,361 5,010,134
Accumulated deficit (531,519) (909,902)
--------------------- ------------------
Total stockholders' equity 4,645,606 4,104,955
--------------------- ------------------
Total liabilities and stockholders' equity $ 7,347,644 $ 6,359,534
===================== ==================
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<CAPTION>
MARKET GUIDE INC.
Statement of Operations
(Unaudited)
<S> <C> <C> <C> <C>
For the 3 Months Ended For the 6 Months Ended
------------------------------------------ ---------------------------------------
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1998 1997 1998 1997
-------------- ----------------- --------------- -----------------
Revenues:
Database vendors $ 1,439,110 $ 1,281,896 $ 2,849,042 $ 2,453,298
Market Guide products 855,852 383,996 1,688,971 642,858
Print product 11,368 13,421 22,262 29,170
-------------- ----------------- --------------- ---------------
Total revenues 2,306,330 1,679,313 4,560,275 3,125,326
Expenses:
Salaries, payroll taxes & employee 1,206,614 1,015,752 2,425,317 1,939,150
benefits
Database and product costs 221,532 108,371 360,192 210,767
General and administrative 390,749 293,561 732,834 522,870
Depreciation 122,149 87,794 235,284 171,161
Amortization 117,063 111,483 228,694 203,513
Advertising and promotion 62,829 95,430 150,330 172,895
-------------- ----------------- --------------- ---------------
Total expenses 2,120,936 1,712,391 4,132,651 3,220,356
-------------- ----------------- --------------- ---------------
Income from operations 185,394 (33,078) 427,624 (95,030)
Interest income 7,521 4,402 12,385 12,563
Interest expense 24,504 18,513 49,710 39,251
-------------- ----------------- --------------- ---------------
Income before income taxes 168,411 (47,189) 390,299 (121,718)
Provision for income taxes 7,200 2,000 11,919 2,000
-------------- ----------------- --------------- ---------------
Net income $ 161,211 $ (49,189) $ 378,380 $ (123,718)
============== ================= =============== ===============
Earnings per share:
Basic $ 0.03 $ (0.01) $ 0.08 $ (0.03)
Diluted $ 0.03 $ (0.01) $ 0.08 $ (0.03)
Weighted average number of shares outstanding:
Basic 4,758,276 4,709,801 4,746,710 4,709,002
Diluted 4,950,581 4,737,084 4,964,184 4,735,144
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<TABLE>
<CAPTION>
MARKET GUIDE INC.
Statements of Cash Flows
(Unaudited)
<S> <C> <C>
For the 6 Months Ended
---------------------------------------------------------
Aug. 31, Aug. 31,
1998 1997
---------------------- --------------------
Net income $ 378,380 $ (123,718)
---------------------- --------------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 463,978 374,277
Changes in assets and liabilities:
(Increase)/Decrease in accounts receivable (348,104) (389,732)
(Increase)/Decrease in prepaid assets (181,810) 138,327
Increase/(Decrease) in accounts payable 106,244 (24,970)
Increase/(Decrease) in unearned revenues 439,225 393,153
---------------------- --------------------
Total adjustments 479,533 491,055
---------------------- --------------------
Net cash provided by operating activities 857,913 367,337
---------------------- --------------------
Cash Flows From Investing Activities:
Payments for purchase of fixed assets (408,162) (377,699)
Payments for leasehold improvements (10,615) -0-
Development of computer software and
Product enhancements (280,254) (697,853)
---------------------- --------------------
Net cash used by investing activities (699,031) (1,075,552)
---------------------- --------------------
Cash Flows From Financing Activities:
Payments for capital leases and equipment line of (98,008) (87,724)
credit
Proceeds from issuance of employee's stock plan 87,268 13,841
Proceeds from stock options exercised 75,000 -0-
Proceeds from line of credit -0- 263,005
---------------------- --------------------
Net cash provided by financing activities 64,260 189,122
---------------------- --------------------
Net increase/(decrease) in cash 223,142 (519,093)
Cash at beginning of period 809,618 1,230,893
---------------------- --------------------
Cash at end of period $ 1,032,760 $ 711,800
====================== ====================
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Market Guide Inc.
Notes to Financial Statements
August 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 August 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 equipment line of
credit for an additional year with all the original terms and conditions
remaining in effect. As of August 31, 1998, the Company's had borrowed $471,750
for the purpose of funding acquisitions of capital equipment (principally
computers and peripherals). On August 31, 1998, the equipment line of credit was
converted into a three year term loan with interest and principal payments made
monthly.
The Company still maintains a $400,000 line of credit with Fleet Bank to be used
for working capital purposes. The line of credit expires on August 31, 1999. To
date, the Company has never borrowed against this line of credit.
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.
<PAGE>
Note 4 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>
6 months ended August 31, 1998 6 months ended August 31, 1997
------------------------------ ------------------------------
CreditRisk Market Guide Consolidated CreditRisk Market Guide Consolidated
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Database vendor $ -0- $ 2,849,042 $ 2,849,042 $ -0- $ 2,453,298 $ 2,453,298
Market Guide products 421,628 1,267,343 1,688,971 57,953 584,905 642,858
Print products -0- 22,262 22,262 -0- 29,170 29,170
Total revenues 421,628 4,138,647 4,560,275 57,953 3,067,373 3,125,326
Expenses:
Salaries & benefits 556,653 1,868,664 2,425,317 276,100 1,663,050 1,939,150
Database & product costs 69,829 290,363 360,192 23,471 187,296 210,767
General & admin. 83,853 648,981 732,834 36,337 486,533 522,870
Depreciation 25,563 209,721 235,284 14,141 157,020 171,161
Amortization 39,239 189,455 228,694 32,699 170,814 203,513
Advertising & promo. 75,452 74,878 150,330 91,133 81,762 172,895
Total expenses 850,589 3,282,062 4,132,651 473,881 2,746,475 3,220,356
Operating income (loss) $ (428,961) $ 856,585 $ 427,624 $ (415,928) $ 320,898 $ (95,030)
Accounts receivable $ 336,784 $ 1,058,769 $ 1,395,553 $ 124,753 $ 596,802 $ 947,147
Prop., plant & equip., net 217,544 1,495,220 1,712,764 171,894 1,180,041 1,413,541
Capitalized assets, net 477,021 2,354,667 2,831,688 555,500 1,616,934 2,385,961
Unearned revenue 667,115 772,059 1,439,174 201,800 260,880 641,832
</TABLE>
<PAGE>
Market Guide Inc.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
August 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; o 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(TM), 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(TM) (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, in
May 1998 on Alta Vista, and in August 1998, on the Motley Fool.
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(TM) (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(TM) 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:_Hlt432410698/_Hlt432410698/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(TM) 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.
On September 10, 1998, Market Guide announced the execution of a definitive
option agreement to sell its CreditRisk Monitor business to New Generations
Foods, Inc. If the option is exercised, the purchase price of approximately $2.5
million is payable as follows: An initial payment of $1.5 million less
adjustments by January 31 1999, and the balance in equal monthly installments,
beginning in July 2001 and ending in June 2003. Exercise of the option is at the
discretion of New Generation Foods and is dependent, in large part, on the
Company's ability to raise financing of approximately $2.5 million to fund the
initial payment and CRM's working capital requirements. There are no assurance
that New Generation Foods will conclude the transaction.
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; o Compare companies to a well-defined peer group; o Analyze
and review industry and sector financial and investment characteristics; o
Properly construct portfolios to ensure adequate diversification; and o 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(TM) 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.
<PAGE>
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.
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.
On September 10, 1998, Market Guide announced the execution of a definitive
option agreement to sell its CreditRisk Monitor business to New Generations
Foods, Inc.
If the option is exercised, the purchase price of approximately $2.5 million is
payable as follows: An initial payment of $1.5 million less adjustments by
January 31 1999, and the balance in equal monthly installments, beginning in
July 2001 and ending in June 2003. Exercise of the option is at the discretion
of New Generation Foods and is dependent, in large part, on the Company's
ability to raise financing of approximately $2.5 million to fund the initial
payment and CRM's working capital requirements. There are no assurance that New
Generation Foods will conclude the transaction.
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.
<PAGE>
Results of Operations
For the three months ended August 31, 1998 compared to August 31, 1997
Total revenues for the three months ended August 31, 1998 increased 37% to
$2,306,330 from $1,679,313 for the three months ended August 31, 1997. The
growth in revenues reflects a 12% increase to $1,439,110 in database vendor
sales and a 123% rise to $855,852 in Market Guide product sales.
The Company continues to achieve gains in all its main business segments.
Internet based revenues grew the fastest and continued to represent an expanding
percentage of Market Guide's total revenue. This reflects the servicing of over
forty Internet redistribution agreements and advertising fees generated at
Market Guide's web site (www.marketguide.com). Internet revenues may have been
even higher had Market Guide not made its web site free to all users since May
1998. This promotion has proved successful in increasing web traffic and has
been extended through December 1998.
Market Guide's core base 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.
The Credit Risk Monitor client roster continues to increase steadily, however
operating expenses continue to exceed recognizable revenue.
Total operating expenses for three months ended August 31, 1998 increased 24% to
$2,120,936 from $1,712,391 in the three months ended August 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
August 1998, CreditRisk Monitor resulted in an operating loss of $218,835.
Income from operations for three months ended August 31, 1998 totaled $185,394
compared to an operating loss of $33,078 in the three months ended August 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 August 31, 1998 increased 71% to $7,521.
The increase reflects higher cash balances.
Interest expense for three months ended August 31, 1998 increased 32% to
$24,504. 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 August 31, 1998 totaled $161,211 compared
to a net loss of $49,189 in the three months ended August 31, 1997.
For the six months ended August 31, 1998 compared to August 31, 1997
Total revenues for the six months ended August 31, 1998 increased 46% to
$4,560,275 from $3,125,326 for the six months ended August 31, 1997. The growth
in revenues reflects a 16% increase to $2,849,042 in database vendor sales and a
163% rise to $1,688,971 in Market Guide product sales.
The Company continues to achieve gains in all its main business segments.
Internet based revenues grew the fastest and continued to represent an expanding
percentage of Market Guide's total revenue. This reflects the servicing of over
forty Internet redistribution agreements and advertising fees generated at
Market Guide's web site (www.marketguide.com). Internet revenues may have been
even higher had Market Guide not made its web site free to all users since May
1998. This promotion has proved successful in increasing web traffic and has
been extended through December 1998.
Market Guide's core base 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 first sixth months
of the current fiscal year. The Credit Risk Monitor client roster continues to
increase steadily, however operating expenses continue to exceed recognizable
revenue.
Total operating expenses for six months ended August 31, 1998 increased 28% to
$4,132,651 from $3,220,356 in the six months ended August 31, 1997. The increase
in operating expenses reflects Market Guide's continuing investment in its
Internet effort and its CreditRisk Monitor division. For the six months ended
August 1998, CreditRisk Monitor resulted in an operating loss of $428,961.
Income from operations for the six months ended August 31, 1998 totaled $427,624
compared to an operating loss of $95,030 in the six months ended August 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 six months ended August 31, 1998 decreased 1% to $12,385.
The decrease reflects a lower cash balance in the first quarter.
Interest expense for six months ended August 31, 1998 increased 27% to $49,710.
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 six months ended August 31, 1998 totaled $378,380 compared to
a net loss of $123,718 in the six months ended August 31, 1997.
Liquidity and Capital Resources
As of August 31, 1998, the Company's working capital (current assets less
current liabilities) increased 25% to $596,982 from $479,454 as of February 28,
1998. The Company's cash and cash equivalents increased 28% to $1,032,760 from
$809,618 as of February 28, 1998.
For the six months ended August 31, 1998, net cash provided by operating
activities increased 134% to $857,913. The increase reflects $378,380 in net
income versus a loss of $123,718 in August, 1997 and higher depreciation and
amortization expenses.
For the six months ended August 31, 1998, net cash used in investing activities
decreased 35% to $699,031. The decrease reflects the Company's
reduction in capitalized projects due to the completion of several projects.
For the six months ended August 31, 1998, net cash from financing activities
decreased 66% to $64,260. The decline reflects no equipment financing for the
six months ended August 1998.
The Company did not engage in any borrowing during the first six months.
The Company believes its current liquidity is sufficient to meet its obligations
during the next twelve months.
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 1999. 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.
<PAGE>
Other Information
Item 1 Legal Proceeding None
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)
/s/ HOMI M BYRAMJI
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<NAME> Market Guide Inc.
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