UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ x ] Annual Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 [fee required] For the fiscal
year ended February 28, 1999
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [no fee required]For the transition period from
__________ to ___________
Commission File Number: 291525-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)
(516) 327-2400
(Registrant's Telephone Number, including Area Code)
None
(Securities Registered Pursuant to Section 12(b) of the Act)
Common Shares - $.001 Par Value
(Securities Registered Pursuant to Section 12(g) of the Act)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of May 17, 1999, the aggregate market value of the voting stock held by
non-affiliates, 2,764,994 shares of Common Stock, $.001 par value, was
$51,843,638 based on the closing price of $18 3/4 for one share of Common Stock
on such date.
The number of shares outstanding of the issuer's Common Stock, as of
May 17, 1999 was 4,796,963.
<PAGE>
PART I
Item 1: Business
Business
Market Guide is a leading online provider and publisher of value-added financial
data and other information on publicly traded companies. The Company maintains
one of the largest U.S. public company databases with over 11,000 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. Company analysts regularly compile and process information
filed with the SEC, issued in press releases or carried in other media reports.
The analysts assess this raw data and update each company's information as soon
as relevant information becomes available. This is at least four times and often
more than eight times per year. The Company has also created widely used and
well-regarded proprietary industry and sector groups and assigned companies to
these industries and sectors. The Company then adds value by computing ratios,
peer group comparisons, growth rates and other statistics, which are presented
as field information in various time tested report formats that follow a
recommended analytic process and are supported by extensive education content.
The Company also has a historical daily pricing database going back to 1983 and
is nearing introduction of an exciting new product with business description,
officer and director information and business and geographical segment
information.
The Company acquires, integrates, condenses and publishes accurate, timely, and
objective financial, descriptive and other information on publicly traded
corporations. The Company markets this information along with proprietary
software to the professional and individual investment communities, through the
Internet (www.marketguide.com) and other distribution channels in a cost
effective manner.
Market Guide receives in excess of 95% of its revenue from the sale of this
information and attendant software through Internet and on-line distribution
channels. The balance of revenue is derived from sales of CD/Rom and printed
products.
Market Guide adds value, distinguishes itself from competition, and serves its
clients through its:
Flexible database design which presents financial statements in the
same detail as issued by each company. This gives users important
insights not available in competitive databases, thereby enabling them
to make better informed investment decisions;
Mapping the financials into standardized formats to allow consistent
calculations and cross company comparisons; o Inclusion of auxiliary information
such as earnings estimates, price performance, relative price performance,
(summary) insider and institutional ownership statistics, bond ratings,
corporate profile information 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 and sector comparisons, that allow users
to quickly and efficiently make carefully considered investment decisions; and
Development of efficient, timely, cost-effective and easy to use software
delivery systems such as Market Guide for Windows(TM) and the Company's Internet
site (www.marketguide.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, individual
investors, discount brokerage firms, financial websites and other Internet
sites. The Company sells its information through three channels: the database
vendors (through Internet, online information vendors), Market Guide for
Windows(TM) (its proprietary analytic software) and print publications.
Internet
The Company has created a dynamic, comprehensive and extremely useful Internet
site. The site contains advertising supported content and will soon be expanded
to include subscription based services. Advertising supported content is free to
the user and Market Guide expects to cover its costs and generate profits
through the sale of advertising and in the future, receipt of subscription
revenues.
As of February 28, 1999, advertising supported content included:
Real time price quotes;
Market Guide's Company Snapshot Report;
Market Guide's Performance Report;
Market Guide's Financial Highlights Report;
The Market Guide Ratio Comparison Report;
The Market Guide Select Financial Statements Report;
Market Guide's What's Hot/What's Not service that identifies the price
performance leaders and laggards by sector, industry and company over
various time periods;
NetScreen (an online stock screen application); and o Market commentary (in
partnership with Briefing.com); o News (in partnership with News Alert);
Price charts (in partnership with Neural Applications Corp.).
In addition to providing direct access to users of www.marketguide.com, Market
Guide also hosts private label and co-branded sites for various customers of
vendors including Charles Schwab, Ameritrade, Yahoo! and America Online. Private
label sites generally have the look and feel of the vendor's site, do not
contain advertising and are restricted to registered users of the vendor.
Co-branded sites are often advertising supported and will have a subscription
component when Market Guide introduces subscription-based services.
Significant Customers
In Fiscal 1999, Reuters America, Inc., OneSource Information Services, Inc. and
Bridge Information Systems, Inc. accounted for 14.9%, 14.2% and 13.4% of total
revenues, respectively.
Vendors
Market Guide works in partnership with financial information service vendors,
discount brokerage firms and financial and other websites. 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 and timely 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.
Market Guide currently has relationships with over 100 information service
vendors that currently distribute the Market Guide Database and/or Internet
products including: Accutrade; AltaVista; America Online; American Association
of Individual Investors; Ameritrade; Argus Research; ADP; AIQ Systems, Inc.;
Bridge Information Systems Inc.; Business Wire, Inc.; Charles Schwab and
Company; Charter Media; CNNfn; Data Broadcasting Corporation; Data Downlink; Dow
Jones Markets; FactSet Research Systems, Inc.; The Financial Post Company; First
Call Corporation; Go2Net, Inc.; Holt Value Associates; Horsesmouth LLC; ILX
Systems Inc.; Individual Investor Group; InfoSpace Inc.; Instinet Analytics;
Interactive Data Corporation; The Investext Group; Investools Inc.; Motley Fool;
National Discount Brokers; 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; Siebel Systems, Inc.; Telemet America, Inc.;
Telescan, Inc.; TheStreet.com; Track Data Corporation; Vickers Stock Research
Corporation; Wall Street Research Net, LLC; Wall Street Source; Waterhouse
Securities, Inc.; Windows on Wall Street; and Yahoo!.
Market Guide for Windows(TM) and StockQuest(TM)
Market Guide for Windows(TM) ("MGW") is a CD/Rom based analytic and reference
product targeted principally at institutional investors and high end individual
investors. Market Guide for Windows contains comprehensive reports of Market
Guide information as well as earnings estimates from First Call Corporation. It
has powerful yet easy to use screening, reporting and spreadsheet downloading
capabilities. MGW is available through weekly, biweekly, monthly or quarterly
subscription arrangements.
The same MGW software with a subset of approximately 60 screening items and no
reports is called StockQuest(TM) and is marketed to individual investors from
our website. Users download the StockQuest program and weekly updates from our
website and run the application locally.
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 enabling subscribers to
continue following companies in which they have an interest. However, from
time-to-time companies covered in this publication do change. The most common
reasons for deletion of coverage are:
The company has been acquired in a merger, leveraged buyout or a similar
transaction;
The company has not filed financial statements with the Securities and
Exchange Commission for two or more consecutive 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.
Discontinued Operations -- CreditRisk Monitor
On January 15, 1999, Market Guide concluded an agreement to sell its CreditRisk
Monitor division to New Generations Foods, Inc. (OTCBB symbol: NGNF). Subsequent
to consummation of the transaction, New Generation Foods changed its name to
CreditRisk Monitor.com Inc. (new OTCBB symbol: CRMZ). The purchase price of
approximately $2.3 million was payable to Market Guide as follows: An initial
payment, after adjustments, totaling $1.2 million paid on January 15, 1999 and
the balance consisting of two notes totaling $1.1 million to be paid in equal
monthly installments, beginning in July 2001 and ending in June 2003.
Competition
The investment and financial information industry is highly competitive with
many different firms serving the industry's needs. There are numerous print and
electronic publishers of information for the investment community, most of whom
have been in business longer, are better known and whose financial resources
exceed those of the Company. Among the better known competitors are: Standard &
Poor's (McGraw Hill), Moody's, Value Line, Media General Financial Services and
Disclosure (Primark).
The Company believes that it is distinguished from much of its competition as it
compiles, maintains, and publishes one of the largest and most timely databases
of investment quality information. Market Guide also competes by providing
database structure and content that help users make better informed decisions
and through the effective use of technology that enables the Company to be a
price leader.
One of the most significant distinctions is that Market Guide stores and
displays company financials in the same "company specific line item description"
format used by the subject company in its SEC filings. "Company specific line
item description" means that the line item terminology assigned to Income
Statement, Balance Sheet and Statement of Cash Flow values is the same as that
used by the company in its official reports. For example, "Aircraft Fuel" and
"Landing Fees" may be shown for an airline company; "Newsprint" and "Postage"
for a newspaper publisher. This allows users to project the impact of external
events such as changes in the price of oil, paper or postage on the
profitability of a company. Competitive databases might consolidate these items
under general headings such as "Costs of Goods Sold."
Principal methods of competition between companies engaged in the historical
financial information business include but are not limited to: accuracy of data;
timeliness of database updating; size of the universe presented; depth of
coverage of each company in the universe; number of years of coverage; methods
of delivery to the end user; the inclusion of analysis or opinion;
customer/vendor support; and price.
Personnel
As of February 28, 1999, the Company had a staff of 97 full-time employees, an
increase from 73 (non CreditRisk Monitor) full-time employees at the same
time one year ago.
Euro Compliance
Market Guide has worked with its vendor partners to create a comprehensive
strategy for dealing with the new Euro currency which went into effect on
January 1, 1999. Market Guide has revised its systems to be fully Euro
compliant.
Item 2: Properties
The Company currently leases a total of approximately 19,000 square feet at 2001
Marcus Avenue, Lake Success, New York 11042-1011.
Item 3: Legal Proceedings
The Company is involved in various routine legal proceedings incidental to the
conduct of its business. Management does not believe that any of these legal
proceeds will have a material adverse effect on the financial condition,
operations or cash flows of the Company.
Item 4: Submission of Matters to a Vote of Security Holders
None.
Item 5: Market for Registrant's Common Equity and Related Stockholder Matters
Effective March 5, 1997, the Company's stock commenced trading on the Nasdaq
SmallCap Market under the symbol MARG. The table below sets forth, for the
fiscal periods shown, the high and low closing prices for the Common Stock. On
February 26, 1999, the last reported sale price of the Common Stock as reported
on the Nasdaq SmallCap Market was 10 3/4 per share.
Fiscal 1999 High Low
First Quarter 29 1/2 2 1/2
Second Quarter 10 3/4 4
Third Quarter 14 7/16 3 1/2
Fourth Quarter 21 8 1/8
Fiscal 1998 High Low
First Quarter 4 3/8 2 1/4
Second Quarter 3 3/4 2 3/8
Third Quarter 3 1/2 1 3/4
Fourth Quarter 3 1/8 2 1/4
On May 17, 1999, there were 212 holders of record of the Common Stock of the
Company. The Company estimates the number of beneficial owners of the Company's
Common Stock on May 17, 1999 to be approximately 3,800.
The Company has never paid a cash dividend on its Common Stock. The Board of
Directors currently intends to retain all earnings to finance the expansion of
the Company's business and does not anticipate paying cash dividends in the
foreseeable future.
Item 6: Selected Financial Data
The following is selected financial data only, and is qualified by the Financial
Statements, in their entirety, which are set forth elsewhere in this Form 10-K.
(Note: Amounts for years prior to February 28, 1999 have been restated to
reflect, (i) the CRM division as a discontinued operation, and (ii) a change in
accounting for certain operating leases, see Notes C and J to the financial
statements).
<PAGE>
<TABLE>
SUMMARY OPERATING DATA
<CAPTION>
Fiscal Year Ended February 28, February 28, February 28, February 29, February 28,
1999 1998 1997 1996 1995
--------------- ---------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 8,839,521 $ 6,602,733 $ 4,776,418 $ 3,999,759 $ 2,687,950
Income from continuing
operations
1,723,946 1,032,978 292,743 352,368 203,990
Income per share from
continuing operations - diluted 0.35 0.22 0.07 0.08 0.05
Shares used in the calculation of
income per share 4,914,647 4,755,905 4,408,378 4,401,135 4,256,999
</TABLE>
<TABLE>
SUMMARY BALANCE SHEET DATA
<CAPTION>
February 28, February 28, February 28, February 29, February 28,
1999 1998 1997 1996 1995
--------------- ---------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Working capital $ 2,221,755 $ 860,931 $ 1,447,754 $ 974,102 $ 766,951
Total assets 8,012,939 6,072,493 5,228,647 3,471,704 2,603,097
Long term debt and
obligations under
capital leases, excluding
Current maturities 403,107 761,981 564,262 291,202 182,737
Stockholders' equity 5,889,958 3,831,701 3,847,627 2,158,975 1,709,023
</TABLE>
<PAGE>
PART II
Item 7: Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis of the fiscal years ended February 28,
1999, February 28, 1998, and February 29, 1997 should be read in conjunction
with the Financial Statements and Notes thereto.
Results of Operations
For the fiscal year ended February 28, 1999 compared to restated fiscal year
ended February 28, 1998
Total revenues for the fiscal year ended February 28, 1999 increased 34% to
$8,839,521. The growth in revenues reflects increases of 26% in database vendor
sales to $6,886,761 and 73% in Market Guide product sales to $1,906,201. The
growth in revenue reflects the addition of 35 new vendors in the 1999 fiscal
year (95 vs. 60) primarily related to Internet redistribution and co-branded
relationships, growth in sales from several of the Company's institutional and
brokerage vendors, a 40% increase in Market Guide for Windows sales reflecting
greater market penetration, and an increase of more than 116% in direct Internet
revenue. Internet revenue benefited from a full year of advertising revenues.
Advertising revenue increased thirty-five fold and strong page view growth was
achieved at the Company's Internet site - www.marketguide.com. Print product
revenues, consisting mainly of the Market Guide - Select OTC Stock Edition,
decreased 9% to $46,559 as this product segment has been de-emphasized.
Costs of revenue increased 33% to $3,061,807 reflecting additional costs related
to covering an increased number of companies in the Market Guide Database as
well as increased royalty payments to third party content providers.
Selling, general and administrative expenses increased by a more moderate 16% to
$2,723,357. This increase was attributable to additional sales personnel and
recruitment costs, increased facilities expenses, additional costs related to a
four-fold increase in the number of current shareholders, and higher accounting
and professional fees.
Depreciation and amortization expense increased 22% to $845,719 reflecting the
acquisition of additional computer hardware, software and ancillary equipment to
support the Company's expanding Internet infrastructure and the purchase of
additional computer equipment to support a larger employee base.
Advertising and promotion costs decreased 6% to $151,005 reflecting the
Company's ability to transact more business via email as opposed to the
historical sales process of frequent visits to existing and potential customers.
Interest income rose 52% to 32,161 reflecting a more than doubling of the
Company's year end cash and marketable securities position. The majority of the
cash and marketable securities increase was attributable to the January 1999
sale of the CreditRisk Monitor division to New Generation Foods, Inc.
Interest expense increased a moderate 5% to $90,002 reflecting a reduction in
capital lease obligations outstanding offset by the conversion of the Fleet Bank
line of credit to a three-year term loan effective September 1, 1998.
For the reasons described above, income before income taxes and discontinued
operations increased 92% to $1,999,792 from $1,040,252 in fiscal 1998.
Income tax expense increased from $7,274 to $275,846 in the fiscal year ended
February 28, 1999. Effective in the fourth quarter of fiscal 1999, the Company
had fully utilized all its net operating loss carryforwards. The Company's
effective tax rate rose to 41% in the fourth quarter and 14% for the fiscal year
ended February 28, 1999.
For the reasons described above, income from continuing operations expanded 67%
to $1,723,946 from $1,032,978 in fiscal 1998.
Loss from discontinued operations reflected the sale of the Company's CreditRisk
Monitor (CRM) division in January 1999. Losses incurred in this division
declined 60% to $439,849 reflecting a growing number of customers for the CRM
service and a cost containment program instituted in the middle of the 1999
fiscal year. Additionally, the Company recognized a gain of $225,572, net of
$162,876 in income taxes, related to receipt of $1,233,187 upon consummation of
the sale of CRM to New Generation Foods, Inc.
Net income totaled $1,509,669 for the fiscal year ended February 28, 1999
versus a restated net loss of $54,043 in the fiscal year ended February 28,
1998.
Restated results for the fiscal year ended February 28, 1998 compared to
restated fiscal year ended February 28, 1997
Total revenues for the fiscal year ended February 28, 1998 increased 38% to a
restated $6,602,733 from a restated $4,776,418 in fiscal year 1997. Revenues
have been restated to exclude sales from discontinued operations (CRM). The
increase in revenues reflects a 30% increase in database vendor sales to
$5,452,484 and Market Guide product sales growth of 117% to $1,099,257. Revenue
growth was attributable to continued sales to our traditional core of vendors
that sell to the institutional, retail, and individual investor marketplaces,
new revenue from the addition of more than thirty Internet related vendors,
growth in subscription sales at the Company's web site (www.marketguide.com),
and incremental sales of Market Guide for Windows. Print product revenues,
consisting mainly of the Market Guide - Select OTC Stock Edition, decreased 18%
to $50,992 from $61,853 in fiscal year 1997. The decline in print product sales
reflects lower sales to public libraries due to Market Guide's decision to
concentrate on marketing electronic products and services.
Total operating expenses for the fiscal year ended February 28, 1998 increased
24% to a restated $5,497,777 from a restated $4,441,562 in fiscal year 1997.
Higher operating expenses principally reflected costs associated with increased
staffing levels, higher depreciation and amortization charges, and increased
sales and marketing activities.
Income from operations for the fiscal year ended February 28, 1998 increased
230% to a restated $1,104,956 from a restated $334,856 in fiscal year 1997.
Results benefited from strong vendor revenues and a reduction in operating
expenses as a percentage of sales.
Interest income for the fiscal year ended February 28, 1998 decreased 32% to
$21,173 from $31,128 in fiscal 1997. The decrease reflects lower cash balances
throughout the fiscal year primarily related to funding continued operating
losses at the Company's CreditRisk Monitor division.
Interest expense for the fiscal year ended February 28, 1998 increased 14% to
$85,877 from $75,592 in fiscal year 1997. Higher interest expenses included
additional capital lease service requirements to fund equipment acquisitions in
fiscal year 1998.
Income tax provision for the fiscal year ended February 28, 1998 totaled $7,274
compared with income tax benefit of $2,351 in fiscal year 1997.
Income from continuing operations for the fiscal year ended February 28, 1998
increased 253% to $1,032,978 from $292,743 in fiscal year 1997.
Loss from discontinued operations increased from $114,971 to $1,087,021
reflecting inclusion of a full year of operating losses attributable to the
CreditRisk Monitor division.
A restated net loss for the fiscal year ended February 28, 1998 totaled $54,043
versus a restated net income of $177,772 in fiscal year 1997.
Liquidity and Capital Resources
As of February 28, 1999, the Company's working capital (current assets less
current liabilities) increased 158% to $2,221,755 when compared to the amounts
at February 28, 1998. The increase of $1,360,824 in working capital resulted
principally from the disposition of the Company's CreditRisk Monitor division,
and an increase in cash and cash equivalents and accounts receivable. The
Company's cash and cash equivalents increased 127% to $1,838,408 when compared
to the balance at February 28, 1998.
For the fiscal year ended February 28, 1999, net cash provided by operating
activities from continuing operations increased 12% to $2,266,189 when compared
to February 28, 1998. This increase reflects an increase in income from
continuing operations and higher non-cash expenses (depreciation and
amortization), partially offset by an increase in accounts receivable and
deferred tax assets.
For the fiscal year ended February 28, 1999, net cash used in investing
activities decreased 38% to $963,170 when compared to the fiscal year ended
February 28, 1998. The decrease reflects proceeds from the sale of the
CreditRisk Monitor division.
For the fiscal year ended February 28, 1999, net cash used in financing
activities decreased 91% to $12,906 when compared to the fiscal year ended
February 28, 1998. The decline reflects an increase in proceeds from exercise of
stock options.
Net cash used in discontinued operations decreased 65% to $261,323 when compared
to the fiscal year ended February 28, 1999. The decline in loss reflects lower
losses from discontinued operations.
The Company believes its current working capital, cash to be generated from
operating activities and accounts receivable under its existing credit
facilities will be sufficient to meet its obligations during the next twelve
months.
Year 2000 Compliance
Market Guide has completed its initial inventory and assessment of its internal
systems, proprietary software, and products. Preliminary indications are Market
Guide is ready for the change occurring January 1, 2000. The Company is
regularly revisiting the inventory of its systems as they change, and all
systems are being thoroughly tested before being put into production.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the particular year. Computer programs that
have date-sensitive software may recognize a date use "00" as the year 1900
rather than the year 2000. This could result in system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
Currently, the Company is in the process of comprehensive, systematic testing of
all aspects of its business. The Company is communicating with all of its
significant suppliers and customers to determine the extent to which the Company
is vulnerable to those third parties' failure to remediate their own Year 2000
Issues. The Company's current assessment is based on presently available
information. However there can be no guarantee that the systems of other
companies on which the Company's system relies will be converted on a timely
basis, or that failure to convert by another company, or a conversion is
incompatible with the Company's systems, would not have a material adverse
effect on the Company.
As of May 1999, the following states of readiness are believed to exist for the
following subject areas:
Products
Market Guide's products will not be changed as a result of the Year 2000
Readiness Program. Formats for all date elements in each of our products will
not change. Most of the Company's current files already include only four-digit
years. Any two-digit years will continue to be represented by two digits. All
calculations involving dates as well as the production and dissemination of
these files is being rigorously tested.
Production Processes and Application Software
Market Guide has implemented a Year 2000 test lab facility which is dedicated to
testing systems for Year 2000 compliance and which is designed to replicate, as
closely as possible, the Company's daily production environment. This test
environment is being used to evaluate whether the in-house systems are Y2K ready
as well as to enable the Company to identify those third party information
providers who are also Year 2000 ready. Testing is to be completed by August 31,
1999, and the test environment will not be dismantled until well into the year
2000. This allows the Company to address any unanticipated problems as they
arise.
Internal Administrative Systems
All hardware, systems software, third party application software, and outside
services are being examined for Year 2000 readiness. The Company is currently
reviewing its office systems (telephone, security, workstations, accounting
systems, etc.) in order to reprogram or replace incompatible hardware or
software.
Contingency Planning
Market Guide is in the process of drafting contingency plans for all of its
mission critical systems in the event of an unforeseen Y2K failure. An
experienced Y2K contingency planner, with prior experience developing Y2K
contingency plans for a major Fortune 500 company, is leading our planning.
Contingency plans will be completed by September 30, 1999, with two Company-wide
rehearsals planned during the fourth calendar quarter of 1999.
Worst Case Scenario
The total cost of the Year 2000 project was estimated at $200,000 for the
Company's critical systems and is being funded through operating cash flows. Of
the total projected cost, approximately $80,000 attributable to the purchase of
new hardware and software which is being capitalized. To date, the Company has
expended $40,000 towards the purchase of new hardware and software. The
remaining $120,000 is to cover personnel and non-capital expenses which will be
expensed as incurred and is not expected to have a material effect on the
results of operations. To date, the Company has expended a $20,000 of the
$120,000 to cover personnel and non-capital expenses. The costs of the project
and date on which the Company plans to complete the Year 2000 modifications and
conversions are based on management's best estimates which were derived
utilizing numerous assumptions of future events, including the continued
availability of certain resources, third party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans. Specific
factors that might cause such material differences include, but are not limited
to, the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, failure of third parties on
which the Company relies and similar uncertainties. However, the Company will
not be able to function in the event of an extended power failure or a failure
of the telecommunications services provided by the local telephone company and
or the Company's Internet service providers.
Due to general uncertainty inherent in the Year 2000 problem, including the
uncertainty associated with suppliers and customer, the potential effect on the
financial results and the condition of the company has not been measured. The
Company intends the Year 2000 program to be completed on a timely basis so as to
significantly reduce the level of uncertainty and the impact on business
operations and financial results.
Item 7A: Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk related to changes in interest rates. All
of the Company's long-term debt (approximately $393,000 at February 28, 1999) is
at a variable rate of interest and is not hedged by any derivative instruments.
If market interest rates increase by five percent from levels at February 28,
1999, the effect on the Company's results of operations would be approximately
$20,000.
Item 8: Financial Statements and Supplementary Data
This information required by Item 8, and an index thereto, appears at pages F-4
through F-18 (inclusive) of this Report, which pages follow page 19.
Item 9: Changes in and Disagreement with Accountants on Accounting and
Financial Disclosure
Market Guide has selected Ernst & Young LLP as the Company's independent
auditors for the fiscal year ended February 28, 1999.
The Board of Directors approved the selection of Ernst & Young LLP at a regular
meeting on March 29, 1999. The decision to change independent auditors was based
on the Company's rapid growth.
Market Guide's prior independent auditors, Zerbo, McKiernan & Zambito, have
served as Market Guide's auditors for the past nine years and played an
important role in assisting Market Guide in its growth from a small OTC Bulletin
Board company to its status today on the Nasdaq Small Cap Market. Zerbo,
McKiernan & Zambito LLC, will serve as consultants over the next several months
to ensure a smooth transition. There were no disagreements on accounting and
financial disclosure.
<PAGE>
PART III
Item 10: Directors and Executive Officers of the Registrant
(a) Identification of Directors and Executive Officers
The names, ages and principal occupations of the Company's Directors as
of the end of the reporting period, and the data on which their term of
office commenced and expires, are as follows:
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL
NAME AGE TERM OF OFFICE SINCE OCCUPATION
================================ =========== ==================== ==================== ==========================================
<S> <C> <C> <C> <C>
Thomas A. Prendergast 65 1 1997 Chairman of the Board of Directors of
the Company, Management Consultant,
Certified Public Accountant, &
Entrepreneur
John D. Case 54 1 1984 General Counsel and Director of the
Company
Homi M. Byramji 46 1 1988 President, Chief Executive Officer,
Treasurer and Director of the Company
Raymond B. Dooley 52 1 1989 Banker, specializing in structuring
government backed loans and Director of
the Company
Mark B. Burka 49 1 1995 Portfolio Manager, Manager Pension and
Deferred Benefit Investments, Aon
Advisors, Inc. and Director of the
Company
Steven A. Hirsh 59 1 1997 Portfolio Manager, William Harris & Co.
and Director of the Company
Jeffrey S. Geisenheimer 33 N/A N/A Chief Financial Officer and Corporate
Secretary of the Company
</TABLE>
(1) Directors are elected at the annual meeting of stockholders and hold
office until the following annual meeting.
(2) Time Warner, Inc. has the right to name a Director to the Board if it
retains at least a 3.5% ownership in the Company. Time Warner, Inc.
currently owns 3.3% of the shares outstanding.
(3) Thomas A. Prendergast assumed the position of Chairman in August 1998.
<PAGE>
(b) Business Experience
Thomas A. Prendergast joined the Board of Directors in November 1997.
In August 1998 he became the Chairman of Market Guide. He is an El
Paso, Texas based management consultant, entrepreneur, and private
investor who has previously served on the boards of sixteen public
companies. In five instances he was Chairman of their respective
boards. A Certified Public Accountant, Mr. Prendergast holds a B.S.
degree from Fordham University and has engaged in post-graduate studies
at the University of Texas, El Paso. He was a founding member of the El
Paso Community College and served as the President of its Board of
Trustees from 1969 to 1982.
John D. Case is a graduate of Hofstra University (B.A. 1968) and
Suffolk University Law School (J.D. 1971). He is admitted to the
practice of law in New York State and Federal jurisdictions. Prior
to assuming the Company's Presidency and Chairmanship in February
1989, he was a Director of the Company (elected 1984) and was engaged
in the practice of law. Mr. Case served as President and CEO of
the Company from February 1989 to February 1992 and Chairman from
February 1989 to August 1998. Mr. Case is currently compensated in
the form of cash and qualifies for the Key Employee Incentive Plan.
Homi M. Byramji, a Director since 1988, had previously consulted in
computerized equity research for nine years. He holds a Masters Degree
in Business Administration, Rutgers University (1975) and became
Secretary and Treasurer of the Company on February 23, 1989. Mr.
Byramji remained Treasurer and assumed the duties of President and CEO
on March 1, 1992. He is compensated in the form of cash and stock and
qualifies for the Key Employee Incentive Plan.
Raymond B. Dooley joined the Board of Directors in March 1989.
He is a banker specializing in structuring government backed
corporate loans. Mr. Dooley holds a Masters Degree in Business
Administration from St. John's University.
Mark B. Burka, C.F.A. joined the Board of Directors in August 1995.
He is a Chartered Financial Analyst and Manager of Pension and Deferred
Benefit Investments with Aon Advisors, Inc. Mr. Burka holds a Masters
Degree in Business Administration from the University of Chicago
Graduate School of Business, and a Bachelor of Arts from the
University of Wisconsin in Madison, Wisconsin. He has been employed
with Aon Advisors, Inc. and its predecessors since 1977.
Steven A. Hirsh joined the Board of Directors in November 1997.
He is a portfolio manager for William Harris & Company, a financial
services company, located in Chicago, Illinois. Since 1994 he has been
the Chairman, President and CEO of Astro Communications, Inc.
(OTCBB: ASTO). He currently serves as a director of Complete Management
Inc. (NYSE: CMI) and the Reliance Standard Life Insurance Company
and First Reliance subsidiaries of Delphi Financial Group (NYSE: DFG).
Mr. Hirsh earned a B.S. degree at the University of Colorado and
holds an MBA from the University of Chicago.
Jeffrey S. Geisenheimer joined the Company in July 1987 as a Securities
Analyst. He has held various positions within the Company including
Director of Research and Director of New Business Development. In
1996, he was promoted to Chief Financial Officer, and in 1998 he was
appointed to the position of Corporate Secretary. Mr. Geisenheimer
earned a Bachelor of Business Administration in Finance and Economics
from Hofstra University and is scheduled to complete his M.B.A. in
Accounting at Hofstra University in December 1999.
All Directors of the Company will serve in such capacity until the next annual
meeting of the Company's stockholders and until their successors have been duly
qualified and elected.
Item 11: Executive Compensation
Summary of Executive Compensation
The following table sets forth the total compensation paid or accrued by the
Company to executive officers of the Company who served in such capacities
during fiscal year 1999 (the "Named Officers") for services rendered during each
of the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
Long-Term Compensation Awards
Annual Compensation
-------------------------------------------- ----------------------------------
Fiscal Year Securities Underlying Stock
Name and Principal Position Salary Bonus Options Granted (#)
<S> <C> <C> <C> <C>
Thomas A. Prendergast.............. 1999 $15,000 -0- 10,000
Chairman 1998 -0- -0- 5,000
1997 -0- -0- -0-
Homi M. Byramji................. 1999 $200,000 -0- 50,000
President, Chief Executive 1998 200,000 -0- -0-
Officer and Treasurer 1997 170,000 -0- -0-
John D. Case....................... 1999 $125,000 -0- 10,000
General Counsel 1998 125,000 -0- -0-
1997 75,000 -0- -0-
Jeffrey S. Geisenheimer.............. 1999 $115,500 -0- 30,000
Chief Financial Officer and 1998 105,000 -0- 13,000
Secretary 1997 100,000 -0- -0-
</TABLE>
Employment Agreements
None of the Company's Executive Officers currently have employment contracts
with the Company.
Employee Stock Purchase Plan
At the August 31, 1995 annual shareholders' meeting, the Board of Directors
approved an Employee Stock Purchase Plan. The Plan enables employees to purchase
common stock of the Company through payroll deductions and/or cash payments at a
15% discount to market prices based on the lower of the average closing price
during the quarter, or the average closing price for the last five days of the
quarter.
<PAGE>
Key Employee Incentive Plan
At the August 31, 1995 annual shareholders' meeting, the shareholders approved a
plan that creates the ability to grant stock and/or options to purchase stock of
the Company to key corporate employees.
Outside Directors' Plan
At the August 31, 1995 annual shareholders' meeting, the shareholders approved a
plan that creates the ability to grant stock awards and/or non-qualified options
to purchase stock of the Company to outside directors.
<PAGE>
Item 12: Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of May 17, 1999 by all persons known
to the Company to be beneficial owners of more than 5% of its Common Stock and
all Officers and Directors, both individually and as a Group. For purposes of
calculating the amount of beneficial ownership and the respective percentages,
the number of shares of Common Stock which may be acquired by a person upon the
exercise of outstanding warrants and options, are considered outstanding, but
shall not be deemed to be outstanding for the purpose of computing the
percentage of Common Stock owned by any other person.
<TABLE>
NAME AND ADDRESS OF AMOUNT AND NATURE OF APPROXIMATE
BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS (2)
<S> <C> <C>
Mark B. Burka (3) (4) 816,000 16.9%
618 Washington Avenue
Wilmette, IL 60091
Homi M. Byramji (5) 593,489 12.1%
One Sheep Hill Road
Boonton Township, NJ 07005
John D. Case (6) 696,343 14.4%
12 Timberland Lane
Old Brookville, NY 11545
Raymond B. Dooley (7) 19,687 0.4%
98 Eighth Avenue
Sea Cliff, NY 11579
Jeffrey S. Geisenheimer (8) 58,500 1.2%
81 Joyce Road
Tenafly, NJ 07670
Steven A. Hirsh (9) 7,500 0.2%
1895 Lake Avenue
Highland Park, IL 60035
Thomas A. Prendergast (10) 98,450 2.0%
46-95 North Mesa, Suite 200
El Paso, TX 79912
All Directors and Officers 2,289,969 45.3%
as a Group (7 persons)
</TABLE>
<PAGE>
(1) Unless otherwise indicated, all shares are directly owned and the
sole voting and investment power is held by the persons named.
(2) Based upon 4,796,963 shares of Common Stock issued and outstanding as
of May 17, 1999.
(3) Includes options for the purchase of 10,000 shares of Common Stock at
$2.50 per share, 10,000 shares of Common Stock at $3.00 per share, and
10,000 shares of Common Stock at $12.00 per share.
(4) Shares owned directly and owned by Mark B. Burka, Trustee FBO Mark B.
Burka Trust.
(5) Includes options for the purchase of 12,500 shares of Common Stock at
$2.68 per share, 50,000 shares of Common Stock at $5.57 per share and
50,000 shares of Common Stock at $13.20 per share.
(6) Includes options for the purchase of 12,500 shares of Common Stock
at $2.68 per share and 10,000 shares of Common Stock at $5.23 per
share.
(7) Includes options for the purchase of 5,000 shares of Common Stock at
$2.50 per share, 5,000 shares of Common Stock at $3.00 per share and
7,500 shares of Common Stock at $12.00 per share.
(8) Includes options for the purchase of 13,000 shares of Common Stock
at $3.00 per share, 30,000 shares of Common Stock at $5.06 per
share, and 10,000 shares of Common Stock at $12.00 per share.
(9) Includes options for the purchase of 7,500 shares at $12.00 per share.
(10) Include options for the purchase of 5,000 shares of Common Stock at
$3.00 per share and 10,000 shares of Common Stock at $4.75.
The Company does not know of any arrangements or pledge of its securities by
persons now considered in control of the Company that might result in a change
of control of the Company.
Item 13: Certain Relationships and Related Party Transactions
None.
Item 14: Financial Statements and Financial Statement Schedules, Exhibits and
Reports on Form 8-K
(a) (1) (2) Financial Statements and Financial Statement Schedules
A list of the Financial Statements and Financial Statement Schedules filed
as a part of this Report is set forth in Item 8, and appears at Page F-1
of this Report; which is incorporated herein by reference.
(a) (3) Exhibits
3 Certificate of Incorporation and Amendments thereto*
3(A) By-Laws*
27 Financial Data Schedule
(b) Reports on Form 8-K
Sale of CreditRisk Monitor division
Change in Independent Accountants
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
MARKET GUIDE INC.
Dated: June 1, 1999
Lake Success, New York /s/ Homi M. Byramji
President, CEO and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
SIGNATURES TITLE DATE
- ---------------------------------------- -------- ------------------------------------- --------------------------------------
<S> <C> <C>
/s/ THOMAS A. PRENDERGAST Chairman June 1, 1999
/s/ HOMI M. BYRAMJI President, CEO June 1, 1999
Treasurer and Director
/s/ JOHN D. CASE General Counsel and Director June 1, 1999
/s/ MARK B. BURKA Director June 1, 1999
/s/ RAYMOND B. DOOLEY Director June 1, 1999
/s/ STEVEN A. HIRSH Director June 1, 1999
/s/ JEFFREY S. GEISENHEIMER CFO and Corporate Secretary June 1, 1999
</TABLE>
<PAGE>
Form 10-K - Item
14(a)(1) and (2)
Market Guide Inc.
List of Financial Statements and Financial Statement Schedules
The following financial statements of Market Guide Inc. are included in Item 8:
Reports of Independent Auditors F-2
Balance Sheets - February 28, 1999 and 1998 F-4
Statements of Operations - Years Ended February 28, 1999,
1998 and 1997 F-6
Statements of Cash Flows - Years Ended February 28, 1999,
1998 and 1997 F-7
Statements of Stockholders' Equity - Years Ended February 28, 1999,
1998 and 1997 F-8
Notes to Financial Statements F-9
The following financial statement schedule of Market Guide Inc. is included in
Item 14(a)(2):
Schedule II - Valuation and Qualifying Accounts F-21
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instruction or are inapplicable and therefore have been omitted.
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
Market Guide Inc.
We have audited the balance sheet of Market Guide Inc. (the "Company") as of
February 28, 1999, and the related statements of operations, stockholders'
equity and cash flows for the year then ended. Our audit also included the
financial statement schedule for the year ended February 28, 1999 listed in the
Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Market Guide Inc. at February
28, 1999, and the results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein for the year ended February
28, 1999.
ERNST &YOUNG LLP
New York, New York
April 23, 1999
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
Market Guide Inc.
We have audited the balance sheet of Market Guide Inc. (the "Company") as of
February 28, 1998, and the related statements of operations, accumulated
deficit, cash flows, and stockholders' equity for the years ended February 28,
1998 and 1997. Our audits also included the financial statement schedule for the
years ended February 28, 1998 and 1997 listed in the Index at Item 14(a). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Market Guide Inc. at February
28, 1998, and the results of its operations and its cash flows for the years
ended February 28, 1998 and 1997, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, present fairly in all material respects the information set forth
therein for the years ended February 28, 1998 and 1997.
As discussed in Notes C and J, respectively, a change in accounting for
operating leases resulted in an understatement of previously reported expenses
and disposal of a division has been reclassified as a discontinued operation.
Accordingly, the financial statements for the years ended February 28, 1998 and
1997 have been restated to reflect these changes.
Zerbo, McKiernan & Zambito, L.L.C.
Fairfield, New Jersey
May 18, 1998 except for Notes C and J as to which the date is April 27, 1999
<TABLE>
MARKET GUIDE INC.
Balance Sheets
<CAPTION>
February 28, February 28,
1999 1998
<S> <C> <C>
Assets (restated)
Current assets:
Cash and cash equivalents $ 1,838,408 $ 809,618
Accounts receivable, net of allowance for doubtful
accounts of $34,000 in 1999 and $24,000 in 1998 1,220,869 827,409
Prepaid expenses and other current assets 272,038 261,107
Deferred income taxes 191,008 11,116
--------------------- ----------------------
Total current assets 3,522,323 1,909,250
Property and equipment, at cost:
Furniture and equipment 1,687,987 1,387,872
Equipment held under capital leases 942,950 942,950
Leasehold improvements 92,930 80,990
--------------------- ----------------------
2,723,867 2,411,812
Less: accumulated depreciation and amortization
(including amortization of $545,985 in 1999 and
$367,610 in 1998 on capital leases) 1,097,653 1,076,395
--------------------- ----------------------
Net property and equipment 1,626,214 1,335,417
Notes receivable, net of deferred gain of $890,000 in 1999 - -
Computer software and database expansion, net of
accumulated amortization of $1,916,881 in 1999 and
$1,530,415 in 1998 2,798,345 2,263,868
Deposits and other assets 66,057 78,084
Net assets of discontinued operations - 485,874
--------------------- ----------------------
Total assets $ 8,012,939 $ 6,072,493
===================== ======================
See accompanying notes.
</TABLE>
MARKET GUIDE INC.
Balance Sheets - continued
<TABLE>
February 28, February 28,
1999 1998
--------------------------- ----------------------
(restated)
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 248,620 $ 218,618
Current portion of long-term debt 157,250 78,625
Current portion of capital lease obligations 201,625 195,406
Unearned revenues 693,073 555,670
--------------------- ----------------------
Total current liabilities 1,300,568 1,048,319
Deferred rent 419,306 430,492
Long-term debt 235,875 393,125
Capital lease obligations 167,232 368,856
--------------------- ----------------------
Total liabilities 2,122,981 2,240,792
Stockholders' equity:
Common stock - $.001 par value; 20,000,000 shares authorized, 4,792,213 and
4,723,594 shares issued and outstanding at 1999 and 1998,
respectively 4,792 4,723
Additional paid-in capital 5,715,891 5,167,372
Retained earnings (accumulated deficit) 169,275 (1,340,394)
--------------------- --------------------
Total stockholders' equity 5,889,958 3,831,701
--------------------- ----------------------
Total liabilities and stockholders' equity $ 8,012,939 $ 6,072,493
===================== ======================
See accompanying notes.
</TABLE>
MARKET GUIDE INC.
Statements of Operations
<TABLE>
Years Ended
------------------------------------------------------------------
February 28, February 28, February 28,
1999 1998 1997
-------------------- ------------------ -----------------
(restated) (restated)
<S> <C> <C> <C>
Revenues:
Database vendors $ 6,886,761 $ 5,452,484 $ 4,207,654
Market Guide products 1,906,201 1,099,257 506,911
Print products 46,559 50,992 61,853
-------------------- ------------------ -----------------
Total revenues 8,839,521 6,602,733 4,776,418
Expenses:
Costs of revenues 3,061,807 2,294,189 1,849,674
Selling, general and administrative 2,723,357 2,347,846 1,975,801
Advertising and promotion 151,005 160,304 105,173
Depreciation 459,253 337,578 222,842
Amortization 386,466 357,860 288,072
-------------------- ------------------ -----------------
Total expenses 6,781,888 5,497,777 4,441,562
-------------------- ------------------ -----------------
Income from operations 2,057,633 1,104,956 334,856
Interest income 32,161 21,173 31,128
Interest expense (90,002) (85,877) (75,592)
-------------------- ------------------ -----------------
Income from continuing operations before income taxes 1,999,792 1,040,252 290,392
Income tax expense (benefit) 275,846 7,274 (2,351)
-------------------- ------------------ -----------------
Income from continuing operations 1,723,946 1,032,978 292,743
Discontinued operations:
Loss from discontinued operations, net of taxes (439,849) (1,087,021) (114,971)
Gain on sale of discontinued operations, net of taxes 225,572 - -
------------------- ------------------ -----------------
(214,277) (1,087,021) (114,971)
------------------- ------------------ -----------------
Net income (loss) $ 1,509,669 $ (54,043) $ 177,772
==================== ================== ================
Net income (loss) per share - basic:
Continuing operations 0.36 0.22 0.07
Discontinued operations (0.04) (0.23) (0.03)
==================== ================== =================
Net income (loss) 0.32 (0.01) 0.04
==================== ================== =================
Net income (loss) per share - diluted:
Continuing operations $ 0.35 $ 0.22 $ 0.07
Discontinued operations (0.04) (0.23) (0.03)
==================== ================== =================
Net income (loss) $ 0.31 $ (0.01) $ 0.04
=================== ================== =================
Shares used in the calculation of net income (loss) per share:
Basic 4,762,561 4,712,503 4,250,124
================== ==================== =================
Diluted 4,914,647 4,755,905 4,408,378
==================== ================== =================
See accompanying notes.
</TABLE>
MARKET GUIDE INC.
Statements of Cash Flows
<TABLE>
Years Ended
February 28, February 28, February 28,
1999 1998 1997
(restated) (restated)
<S> <C> <C> <C>
Cash Flows From Operating Activities From
Continuing Operations:
Income from continuing operations $ 1,723,946 $ 1,032,978 $ 292,743
Adjustments to reconcile income from continuing operations to net cash provided
by operating activities:
Depreciation and amortization 845,719 695,438 510,914
Provision for bad debts 10,000 - 5,000
Issuance of common stock 45,330 10,325 20,481
Deferred rent (11,186) 60,680 80,557
Deferred income taxes (179,892) - -
Changes in operating assets and liabilities:
Accounts receivable (403,460) (269,994) 198,765
Prepaid expenses and other current assets 68,327 148,645 781
Accounts payable and accrued expenses 30,002 39,125 (222,053)
Unearned revenues 137,403 306,991 85,308
Total adjustments 542,243 991,210 679,753
Net cash provided by operating activities from
continuing operations 2,266,189 2,024,188 972,496
Cash Flows From Investing Activities:
Deposits and other assets 12,027 - (14,858)
Purchases of property and equipment (779,937) (223,842) (235,846)
Computer software and database expansion (1,014,584) (1,318,305) (1,145,213)
Proceeds from sale of division, net of related expenses
of $473,863 819,324 - -
-------------- ------------------- -------------------
Net cash used in investing activities (963,170) (1,542,147) (1,395,917)
----------------- ------------------- -------------------
Cash Flows From Financing Activities:
Repayments of long-term debt and capital leases (274,030) (176,011) (250,392)
Proceeds from issuance of common stock in
connection with stock purchase plan 184,999 27,792 31,388
Proceeds from private placement of common stock - - 1,201,771
Proceeds from stock options exercised 76,125 - 100,001
------------------ ------------------- -------------------
Net cash (used in) provided by financing activities (12,906) (148,219) 1,082,768
------------------ ------------------- -------------------
</TABLE>
MARKET GUIDE INC.
Statements of Cash Flows-continued
<TABLE>
For the Years Ended
-----------------------------------------------------------------
February 28, February 28, February 28,
1999 1998 1997
------------------- ------------------ ------------------
(restated) (restated)
<S> <C> <C> <C>
Cash Flows from Discontinued Operations:
Loss from discontinued operations including gain on
sale, net of taxes (214,277) (1,087,021) (114,971)
Adjustments to reconcile loss from discontinued operations to net
cash used in discontinued operations:
Gain on sale of discontinued operations, net of taxes (225,572) - -
Depreciation and amortization 101,292 107,686 5,734
Decrease in net assets of discontinued operations 77,234 224,238 -
-------------------- ----------------- ------------------
Net cash used in discontinued operations (261,323) (755,097) (109,237)
-------------------- ------------------- -------------------
Net increase (decrease) in cash and cash equivalents 1,028,790 (421,275) 550,110
Cash and cash equivalents at beginning of year 809,618 1,230,893 680,783
------------------- ------------------ ------------------
Cash and cash equivalents at end of year $ 1,838,408 $ 809,618 $ 1,230,893
=================== ================== ==================
Supplemental disclosure of cash flow information: Cash paid during the year for:
Interest $ 90,001 $ 85,877 $ 137,578
=================== ================== ==================
Income taxes $ 12,833 $ 6,000 $ 4,200
=================== ================== ==================
Non-cash financing activities:
Acquisition of property and equipment through capital leases
$ - $ 471,750 $ 532,110
=================== ================== ==================
See accompanying notes.
</TABLE>
MARKET GUIDE INC.
Statements of Stockholders' Equity
Years Ended February 28, 1999, 1998 and 1997
<TABLE>
Retained
Additional Earnings Total
Common Stock Paid-in (Accumulated Stockholders'
----------------------------------
Shares Amount Capital Deficit) Equity
---------------- ------------- --------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Balance at February 29, 1996, as
previously reported 4,188,245 $ 4,188 $ 3,618,910 $ (1,174,868) $ 2,448,230
Additional rent expense on
operating leases - - - (289,255) (289,255)
---------------- ------------- --------------- ------------------ ----------------
Balance at February 29, 1996, as
restated 4,188,245 4,188 3,618,910 (1,464,123) 2,158,975
Issuance of common stock in a
private placement for cash 343,363 344 1,201,428 - 1,201,772
Stock options exercised 158,334 158 99,843 - 100,001
Issuance of common stock for
directors' compensation 8,000 8 20,473 - 20,481
Issuance of common stock
pursuant to employees' stock
purchase plan 10,244 10 31,378 - 31,388
Tax benefit from stock option
exercises - - 157,238 - 157,238
Net income - - - 177,772 177,772
---------------- ------------- --------------- ------------------ ----------------
Balance at February 28, 1997 4,708,186 4,708 5,129,270 (1,286,351) 3,847,627
Issuance of common stock
pursuant to employees' stock
purchase plan 15,408 15 38,102 - 38,117
Net income (loss) - - - (54,043) (54,043)
---------------- ------------- --------------- ------------------ ----------------
Balance at February 28, 1998 4,723,594 4,723 5,167,372 (1,340,394) 3,831,701
Stock options exercised 25,375 25 76,100 - 76,125
Issuance of common stock
Pursuant to employees' stock
Purchase plan 43,244 44 230,285 - 230,329
Tax benefit from stock option
exercises - - 242,134 - 242,134
Net income - - - 1,509,669 1,509,669
---------------- ------------- --------------- ------------------ ----------------
Balance at February 28, 1999 4,792,213 $ 4,792 $ 5,715,891 $ 169,275 $ 5,889,958
================ ============= =============== ================== ================
See accompanying notes.
</TABLE>
<PAGE>
MARKET GUIDE INC.
Notes to Financial Statements
February 28, 1999
NOTE A - ORGANIZATION AND BUSINESS
Market Guide Inc. ("Market Guide" or the "Company") is currently engaged in
acquiring, condensing, publishing and distributing historical and current
financial information and related software to the individual, financial
services, corporate and institutional investor marketplaces.
After the sale of the division accounted for as a discontinued operation (see
Note J), the Company operates in one business segment. The Company sells its
information through three channels; online information vendors (using the
Internet), Market Guide software and a print publication. The majority of the
Company's revenue is derived from approximately 100 third party vendors who
distribute and sell Market Guide database products. Sales are made through both
third party vendors and direct sales to end users.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results may differ from those estimates.
2. Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with a maturity of
three months or less when purchased.
3. Revenue Recognition
Revenues from products sold to database vendors are recognized in the
period in which the product is provided based on the actual usage of the
customer or contractual amounts. In certain circumstances, estimates are
used in determining actual usage for purposes of recording revenue on a
monthly basis. Estimates are subsequently reconciled to actual usage and
adjustments are recorded.
Market Guide for Windows products and print products are generally sold on
a subscription basis and revenues are recognized over the term of the
related contract as products are provided.
4. Depreciation and Amortization
Depreciation on furniture and equipment is calculated using the
straight-line method over the estimated useful lives of the assets ranging
from three to seven years. Equipment held under capital leases is amortized
using the straight-line method over the useful lives of the assets ranging
from 3 to 5 years. Leasehold improvements are amortized using the
straight-line method over the shorter of the lease term or estimated useful
life of the asset.
<PAGE>
MARKET GUIDE INC.
Notes to Financial Statements
(continued)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
5. Computer Software and Database Expansion
Management has elected, pursuant to Statement of Financial Accounting
Standards No. 86, "Accounting for Costs of Computer Software to be Sold,
Leased or Otherwise Marketed", to capitalize certain computer software
costs incurred for new product development and database expansion. These
costs are reported at the lower of unamortized cost or net realizable
value. All research and development, database maintenance and customer
support costs are expensed as incurred.
The straight-line method of amortization is used over the estimated
economic life of the asset, generally three to five years. For the years
ended February 28, 1999 and February 28, 1998, the Company capitalized
computer software and database expansion costs of approximately $1,015,000
and $1,122,000, respectively.
6. Long-Lived Assets
When impairment indicators are present, the Company reviews the carrying
value of its long-lived assets in determining the ultimate recoverability
of their unamortized values using future undiscounted cash flow analysis
expected to be generated by the assets. If such assets are considered
impaired, the impairment recognized is measured by the amount by which the
carrying amount of the assets exceed the future discounted cash flows.
Assets to be disposed of are reported at the lower of the carrying amount
or fair value, less costs to sell.
7. Stock-Based Compensation
The Company accounts for its stock-based employee compensation agreements
in accordance with the provisions of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees", and complies with the
disclosure provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock Based Compensation" ("SFAS 123").
8. Income Taxes
The Company accounts for income taxes on the liability method. Accordingly,
deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the carrying amount of
assets and liabilities for financial reporting and income tax purposes, as
determined under enacted tax laws and rates that will be in effect when the
differences are expected to reverse.
9. Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income,"
("SFAS 130") which is effective for fiscal years beginning after December
15, 1997. SFAS 130 establishes standards for reporting and display of
comprehensive income. The adoption of SFAS 130 as of March 1, 1998 did not
have an effect on the Company's financial statements.
<PAGE>
MARKET GUIDE INC.
Notes to Financial Statements
(continued)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
10. Reclassifications
Certain amounts in the Company's financial statements for the years ended
February 28, 1998 and 1997 have been reclassified to conform to the current
year's presentation.
NOTE C - RESTATEMENT OF FINANCIAL STATEMENTS
The Company has restated its financial statements for the years ended February
28, 1998 and 1997 relating to a change in accounting for its operating leases.
The restatement impacted income from continuing operations, net income (loss)
and income (loss) per share for the years ended February 28, 1998 and 1997 as
follows:
<TABLE>
Year ended February 28,
---------------------------------
1998 1997
------------- ------------
<S> <C> <C>
Income from continuing operations:
As reported $ 1,093,658 $ 373,300
Adjustment (60,680) (80,557)
============= ============
As restated $ 1,032,978 $ 292,743
============= ============
Basic and diluted income per share -
continuing operations:
As reported $ 0.23 $ 0.09
Adjustment (0.01) (0.02)
============= ============
As restated $ 0.22 $ 0.07
============= ============
Net income (loss):
As previously reported $ 6,637 $ 258,329
Adjustment (60,680) (80,557)
----------------
==============
As restated $ (54,043) $ 177,772
Basic and diluted net income (loss) per
share:
As previously reported $ 0.00 $ 0.06
Adjustment (0.01) (0.02)
----------------
==============
As restated $ (0.01) $ 0.04
============== ===============
</TABLE>
The accumulated deficit was adjusted from ($1,174,868) to ($1,464,123) at
February 28, 1996; from ($916,539) to ($1,286,351) at February 28, 1997; and
from ($909,902) to ($1,340,394) at February 28, 1998, as a result of the
above-described restatement. Additionally, amounts previously reported for the
CreditRisk Monitor ("CRM") division have been restated to give effect to the
recording of discontinued operations (see Note J).
<PAGE>
MARKET GUIDE INC.
Notes to Financial Statements
(continued)
NOTE D - LONG-TERM DEBT AND LEASING ARRANGEMENTS
On September 1, 1998, the Company and a bank entered into a three-year term loan
that replaced amounts previously outstanding under an equipment financing line
of credit. At February 28, 1999, approximately $393,000 was outstanding under
the term loan and is payable in equal monthly installments through August 2001.
Interest is provided at the prime rate, as defined, plus 1/4% per annum (8.0% at
February 28, 1999) and is payable monthly. The Company also has available a
$400,000 line of credit with the same bank with no borrowings outstanding at
February 28, 1999. The term loan and line of credit are secured by all the
assets of the Company and the loan agreements contain restrictive financial
covenants regarding the maintenance of net income and minimum levels of tangible
net worth, both as defined.
The Company is obligated under various capital leases for computer and office
equipment that expire at dates through 2002 with interest rates ranging from 9%
to 15%.
The Company rents its two Lake Success, New York office facilities under
operating leases which expire in 2005. For the years ended February 28, 1999,
1998 and 1997, rent expense was approximately $432,000, $432,000, and $341,000,
respectively. The operating leases contain rent escalations and renewal options.
Additionally, the Company can exercise a buyout option for one of the leases in
October 2001 for approximately $165,000.
The future minimum payments for all leases and principal repayment of
long-term debt for years ending February 28 (29) are summarized as follows:
<TABLE>
Capital Lease
Obligations Operating Leases Long-Term Debt
----------------- ----------------------- ---------------------
<S> <C> <C> <C>
February 28 (29):
2000 $230,000 $457,000 $157,000
2001 150,000 471,000 157,000
2002 27,000 486,000 79,000
2003 - 502,000 -
2004 - 518,000 -
Thereafter - 739,000 -
-----------------
======================= =====================
Total payments 407,000 $3,173,000 $393,000
======================= =====================
Less amounts representing interest 38,000
-----------------
369,000
Less current portion of obligations
under capital leases 202,000
=================
Long-term obligations under capital leases $167,000
=================
</TABLE>
<PAGE>
MARKET GUIDE INC.
Notes to Financial Statements
(continued)
NOTE E - INCOME TAXES
The following is a reconciliation of income before income taxes:
<TABLE>
Year ended February 28,
--------------------------------------------------------------
1999 1998 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
Income from continuing operations $ 1,999,792 $ 1,040,252 $ 290,392
Loss from discontinued operations (757,447) (1,087,022) (114,971)
Gain on sale of discontinued operations 388,448 - -
================ ================ ================
$ 1,630,793 $ (46,770) $ 175,421
================ ================ ================
</TABLE>
The components of the provision (benefit) for income taxes are as follows:
<TABLE>
Year ended February 28,
---- -------------------------------------------
1999 1998 1997
---- ------------ ----- --------- --- ----------
<S> <C> <C> <C>
Current
Federal $ 470,000 $ - $ -
State 149,000 7,000 (5,000)
Deferred
Federal (462,000) - 2,000
State (36,000) - 1,000
==== ============ ===== ========= === ============
$ 121,000 $ 7,000 $ (2,000)
==== ============ ===== ========= === ============
</TABLE>
The reconciliation of income taxes computed at the US federal statutory rate to
income tax expense is as follows:
<TABLE>
Year ended February 28,
----------------------------------------------------------------
1999 1998 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
Tax expense computed at the federal statutory rate $ 554,000 $ (16,000) $ 60,000
State taxes, net of federal benefit 75,000 5,000 (3,000)
Net operating losses for which no benefit
was provided - 16,000 -
Reduction in valuation allowance (552,000) - (60,000)
Other 44,000 2,000 1,000
----------------- ----------------- ----------------
$ 121,000 $ 7,000 $ (2,000)
================ ================ =================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes.
<PAGE>
MARKET GUIDE INC.
Notes to Financial Statements
(continued)
NOTE E - INCOME TAXES (continued)
Significant components of deferred income tax assets as of February 28 are as
follows:
<TABLE>
1999 1998
---------------- -----------------
<S> <C> <C>
Net operating loss $ - $ 369,000
Accounts receivable 14,000 10,000
Deferred rent 176,000 180,000
Tax credits 11,000 14,000
---------------- -----------------
Total deferred tax assets 201,000 573,000
Valuation allowance (10,000) (562,000)
================ =================
Net deferred tax assets $ 191,000 $ 11,000
================ =================
</TABLE>
The valuation allowance at February 28, 1997 and February 29, 1996 was
approximately $750,000 and $1,100,000, respectively.
NOTE F - STOCKHOLDERS' EQUITY
1. Common Stock
On January 27, 1997 the Company raised approximately $1,202,000 through the sale
of 343,363 shares of restricted common stock at a price of $3.50 per share in a
private placement to a limited number of institutional and individual investors.
During the year ended February 28, 1997, the Company granted 8,000 shares of its
common stock to its outside directors as compensation for services and recorded
approximately $20,000 of compensation expense using the fair value of the common
stock on the date of grant.
The Company maintains a stock bonus program for employees based upon merit and
years of service. In the years ended February 28, 1999 and 1998, the Company
issued 10,000 and 3,750 shares of its common stock and recorded noncash
compensation expense, equal to the fair market value of the common stock on the
date of grant, of approximately $45,000 and $10,000, respectively.
The Company maintains an Employee Stock Purchase Plan (the "Plan") which is
intended to qualify under Section 423 of the Internal Revenue Code. All
employees, except for the Company's President and Legal Counsel, with more than
three months of full time employment prior to the start of each offer period are
eligible. Under the terms of the Plan, 125,000 shares are available for
purchase. The purchase price will be the lesser of an amount equal to 85% of the
fair market value of the common stock calculated at the lower of the average of
the common stock's closing price for a fiscal quarter or the average of the
stock's closing price for the last five trading days of a fiscal quarter. During
the years ended February 28, 1999, 1998 and 1997, 33,244, 11,658, and 10,244
shares of common stock, respectively, have been purchased under the Plan for
approximately $185,000, $28,000 and $31,000.
2. Common Stock Options
The Company maintains an Incentive Stock Option Plan (the "Option Plan") for its
officers and key employees. Pursuant to the Option Plan, the Company may award
up to 750,000 shares of common stock in
NOTE F - STOCKHOLDERS' EQUITY (continued)
the form of incentive options and the option exercise price cannot be less than
the fair market value of the underlying common stock on the date of grant.
The Company also maintains an Independent Directors' Stock Incentive Plan (the
"Directors Plan") for its non-employee directors. Pursuant to the Directors
Plan, the Company may award up to 100,000 shares of common stock in the form of
non-qualified options and the option exercise price cannot be less than the fair
market value of the underlying common stock on the date of grant.
Additionally, the Company granted options to two officers for the purchase of
25,000 shares of common stock in March 1995 (prior to the establishment of the
Option Plan).
Option activity is summarized as follows:
<TABLE>
Shares Weighted-Average
Under Option Exercise Price
------------------- -------------------------
<S> <C> <C>
Outstanding at February 29, 1996 183,334 $0.91
Grants - -
Exercises (158,334) 0.63
Forfeitures - -
------------------- -------------------------
Outstanding at February 28, 1997 25,000 2.68
Grants 204,600 2.93
Exercises - -
Forfeitures - -
------------------- -------------------------
Outstanding at February 28, 1998 229,600 2.93
Grants 275,000 4.76
Exercises (25,375) 3.00
Forfeitures (50,700) 3.00
=================== =========================
Outstanding at February 28, 1999 428,525 $4.22
=================== =========================
Available for grant at February 28, 1999 421,100
===================
</TABLE>
Information regarding stock options outstanding at February 28, 1999 is as
follows:
<TABLE>
Weighted-Average
Remaining
Options Contractual Life Options
Exercise Price Outstanding Exercisable
<S> <C> <C> <C> <C>
$2.50 - $3.00 178,525 6.8 years 89,350
$4.75 - $5.57 250,000 8.6 years 20,000
================= ================== ===================
428,525 7.9 years 109,350
================= ================== ===================
</TABLE>
The weighted average fair value of options granted during the years
ended February 28, 1999 and 1998 was $3.74 and $1.24, respectively.
MARKET GUIDE INC.
Notes to Financial Statements
(continued)
NOTE F - STOCKHOLDERS' EQUITY (continued)
Pro forma information regarding net income (loss) and income (loss) per share is
required by SFAS 123, which also requires that the information be determined as
if the Company had accounted for its stock options under the fair value method
of that statement. The fair value for these options was estimated using the
Black-Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>
Years ended February 28,
--------------------------------------------
Assumption 1999 1998
---- ----
<S> <C> <C>
Risk-free interest rate 4.6% 5.5%
Dividend yield none none
Volatility factor of the expected market price
of the Company's common stock 100% 54%
Weighted-average expected life of the option 4 years 4 years
</TABLE>
The Black-Sholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
under SFAS 123 is amortized to expense over the options' vesting period. For the
years ended February 28, 1999 and 1998 pro forma information is as follows:
<TABLE>
Year ended February 28,
--------------------------------------------------
1999 1998
=================== ==================
<S> <C> <C>
Income from continuing operations $ 1,492,982 $ 985,890
=================== ==================
Income from continuing operations per share:
Basic $ 0.31 $ 0.21
=================== ==================
Diluted $ 0.35 $ 0.21
=================== ==================
Net income (loss) $ 1,278,705 $ (101,131)
=================== ==================
Net income (loss) per share:
Basic $ 0.27 $ (0.02)
=================== ==================
Diluted $ 0.26 $ (0.02)
=================== ==================
</TABLE>
Since no options were granted during the year ended February 28, 1997, pro forma
presentation of income from continuing operations and net income are not
presented.
<PAGE>
MARKET GUIDE INC.
Notes to Financial Statements
(continued)
NOTE G - INCOME (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
Year ended February 28,
------------------------------------------------------------------
1999 1998 1997
<S> <C> <C> <C>
Denominator for basic earnings per share-
weighted-average shares 4,762,561 4,712,503 4,250,124
Effect of dilutive stock options 152,086 43,402 158,254
================ ================ =================
Denominator for diluted earnings per
share-adjusted weighted-average shares
and assumed conversions 4,914,647 4,755,905 4,408,378
================ ================ =================
</TABLE>
The numerator for basic and diluted income (loss) per share for the years
ended February 28, 1999, 1998 and 1997 is the income from continuing
operations and net income (loss) for all such years.
NOTE H - Retirement Plan
The Company provides a retirement plan for all of its employees pursuant to
Section 401(k) of the Internal Revenue Code. Subject to the terms and conditions
of the plan, each employee may contribute a maximum of 15% of their compensation
subject to IRS limitations. The Company has the option of making a matching
contribution to the plan in any year. Matching contributions vest over a
five-year period at 20% per year. The Company provided matching contributions of
approximately $35,000, $54,000 and $13,000 during the years ended February 28,
1999, 1998 and 1997, respectively.
NOTE I - MAJOR CUSTOMERS AND CONCENTRATIONS
For the year ended February 28, 1999, the Company had three major customers
accounting for revenues of 14.9%, 14.2% and 13.4%, respectively. For the year
ended February 28, 1998, the Company had three major customers accounting for
revenues of 16.5%, 12.9% and 12.2%, respectively. For the year ended February
28, 1997, the Company had two major customers accounting for revenues of 14.2%
and 14.1%, respectively.
Company policy is to review a customer's financial condition prior to extending
credit and, generally, collateral is not required. Credit losses are provided
for in the financial statements and have been within management's expectations.
NOTE J - DISCONTINUED OPERATIONS
On January 15, 1999, the Company completed the sale of its CRM division for
approximately $2,300,000, which consisted of approximately $1,200,000 paid in
cash and notes receivable of approximately $1,100,000. The Company recorded a
gain on the sale of approximately $226,000, net of taxes of $163,000, relating
to the cash portion of the proceeds received in excess of the net assets of the
division. The Company has deferred the gain relating to the notes receivable
portion of the sales price until such time as its payment is more fully assured.
The notes receivable are summarized as follows:
<PAGE>
MARKET GUIDE INC.
Notes to Financial Statements
(continued)
NOTE J - DISCONTINUED OPERATIONS (continued)
o $1,000,000 secured promissory note, bearing interest at 6.0% beginning on
July 1, 2001, payable in 24 equal monthly installments of principal and
interest in the amount of $44,320 commencing July 31, 2001 through June
30, 2003. The present value of such promissory note was approximately
$792,000 at its origination.
o $98,162 secured expense promissory note, accruing interest beginning on
February 1, 1999, payable in 24 equal monthly installments of principal
and interest in the amount of $5,286 commencing February 28, 2001 through
January 31, 2003.
Results of operations for the CRM division have been classified as
discontinued operations and prior periods have been restated. For business
segment reporting purposes, data for the CRM division was previously reported as
the segment "CreditRisk Monitor".
Revenues and income from discontinued operations are as follows:
<TABLE>
Years ended February 28,
-----------------------------------------------------------------------
1999 1998 1997
================= ================ ===============
<S> <C> <C> <C>
Revenues $ 667,440 $ 297,244 $ -
================= ================ ===============
Operating loss $ (757,447) $ (1,087,021) $ (114,971)
Income tax benefit 317,598 - -
----------------- --------------- ---------------
Loss from discontinued operations $ (439,849) $ (1,087,021) $ (114,971)
================= ================ ================
Gain on sale $ 388,448
Income tax expense (162,876)
-----------------
Gain on sale, net $ 225,572
=================
</TABLE>
Net assets of discontinued operations at February 28, 1998:
Current assets $ 220,040
Property and equipment, net 193,853
Other assets 516,260
Current liabilities (444,279)
=============
$ 485,874
=============
<PAGE>
MARKET GUIDE INC.
Notes to Financial Statements
(continued)
NOTE K - SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
Selected quarterly financial data for continuing operations for the years ended
February 28, 1999 and 1998 are presented in the following table (in thousands):
(Note: Amounts presented below have been restated to present them the effects of
(i) the CRM division as a discontinued operation, and/or (ii) a change in
accounting for certain operating leases (see Notes C and J)).
<TABLE>
Three months ended
May 31, 1998 August 31, 1998 November 30, 1998 February 28, 1999
<S> <C> <C> <C> <C>
Total revenues $ 2,061 $ 2,079 $ 2,219 $ 2,481
Income from operations 513 443 464 638
Income before taxes and
discontinued operations 493 426 450 631
Income from continuing operations
489 419 443 373
Basic earnings per share from
continuing operations $ 0.10 $ 0.09 $ 0.09 $ 0.08
Basic weighted average number of
shares outstanding 4,735 4,758 4,769 4,788
Diluted earnings per share $ 0.10 $ 0.09 $ 0.09 $ 0.07
Diluted weighted average number
of shares outstanding 4,978 4,951 4,970 5,054
May 31, 1997 August 31, 1997 November 30, 1997 February 28, 1998
Total revenues $ 1,435 $ 1,632 $ 1,646 $ 1,890
Income from operations 77 226 332 470
Income before taxes and
discontinued operations 64 212 315 450
Income from continuing operations
64 210 315 445
Basic earnings per share from
continuing operations $ 0.01 $ 0.05 $ 0.07 $ 0.09
Basic weighted average number of
shares outstanding 4,708 4,710 4,714 4,718
Diluted earnings per share $ 0.01 $ 0.05 $ 0.07 $ 0.09
Diluted weighted average number
of shares outstanding 4,733 4,737 4,754 4,801
</TABLE>
<PAGE>
<TABLE>
MARKET GUIDE INC.
Notes to Financial Statements
(continued)
Schedule II - Valuation and Qualifying Accounts
Column A Column B Column C Column D Column E
--------
- -------------------------------------------------- -------------------- --------------------- ------------------ -------------------
Balance at the Additions Charged
Beginning of the to Costs and Balance at End of
Period Expenses Deductions Period
- -------------------------------------------------- -------------------- --------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Year ended February 28, 1999
Reserves and allowances deducted from asset accounts:
Allowance for doubtful accounts $24,000 $10,000 - $34,000
Year ended February 28, 1998
Reserves and allowances deducted from asset accounts:
Allowance for doubtful accounts $24,000 - - $24,000
Year ended February 28, 1997
Reserves and allowances deducted from asset accounts:
Allowance for doubtful accounts $19,000 $5,000 - $24,000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000720462
<NAME> Market Guide Inc.
<MULTIPLIER> 1
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> FEB-28-1999
<EXCHANGE-RATE> 1.00000
<CASH> 1,838,408
<SECURITIES> 0
<RECEIVABLES> 1,254,869
<ALLOWANCES> 34,000
<INVENTORY> 0
<CURRENT-ASSETS> 3,522,323
<PP&E> 2,723,867
<DEPRECIATION> 1,097,653
<TOTAL-ASSETS> 8,012,939
<CURRENT-LIABILITIES> 1,300,568
<BONDS> 0
0
0
<COMMON> 4,792
<OTHER-SE> 5,885,166
<TOTAL-LIABILITY-AND-EQUITY> 8,012,939
<SALES> 8,839,521
<TOTAL-REVENUES> 8,839,521
<CGS> 3,061,807
<TOTAL-COSTS> 6,781,888
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 90,002
<INCOME-PRETAX> 1,999,792
<INCOME-TAX> 275,846
<INCOME-CONTINUING> 1,723,946
<DISCONTINUED> (214,277)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,509,669
<EPS-BASIC> 0.36
<EPS-DILUTED> 0.35
</TABLE>
