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 November 30, 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 _______
4,787,762 Common shares, $.001 par value were issued and
outstanding on January 13, 1999.
<PAGE>
Table of Contents
Financial Statements
Balance Sheets as of November 30, 1998 (Unaudited) and February 28, 1998
(Restated) 3
Statement of Operations for the Three Months and Nine Months Ended
November 30, 1998 (Unaudited) and November 30, 1997 (Restated) 5
Statements of Cash Flows for the Nine Months Ended November 30, 1998
(Unaudited) and November 30, 1997 (Restate) 6
Notes to Financial Statements 7
Business Description 9
Management's Discussion and Analysis of Financial Condition and
Results of Operations November 30, 1998 13
Other Information 17
Signature 18
<PAGE>
<TABLE>
MARKET GUIDE INC.
Balance Sheets
(Unaudited)
<CAPTION>
November 30, February 28,
1998 1998
(Restated)
--------------------- ------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 901,177 $ 809,618
Accounts receivable (net of allowance
for doubtful accounts) 1,239,960 827,409
Prepaid expenses and other current assets 124,429 114,985
--------------------- -------------------
Total current assets 2,265,566 1,752,012
Property, plant and equipment:
Furniture and equipment 1,912,376 1,387,872
Equipment held under capital leases 942,950 942,950
Leasehold improvements 92,930 80,990
--------------------- -------------------
2,948,256 2,411,812
Less: Accumulated depreciation and amortization
(including amortization of capital leases totaling
$501,391 and $367,610 as of November 30, 1998
and February 28, 1998, respectively) 1,404,032 1,076,395
--------------------- -------------------
Net property, plant and equipment 1,544,224 1,335,417
Net assets of discontinued operations 795,797 485,874
Other assets:
Computer software and product enhancements
(net of accumulated amortization) 2,518,399 2,263,868
Deposits and other assets 77,173 78,084
--------------------- -------------------
Total other assets 2,595,572 2,341,952
--------------------- -------------------
Total assets $ 7,201,159 $ 5,915,255
===================== ===================
</TABLE>
<PAGE>
<TABLE>
MARKET GUIDE INC.
Balance Sheets - continued
(Unaudited)
<CAPTION>
November 30, February 28,
1998 1998
(Restated)
-------------------- ---------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Current maturities of long-term debt and capital
leases $ 365,865 $ 274,031
Unearned revenues 912,219 555,670
Accounts payable and other accrued expenses 481,276 218,618
--------------------- -------------------
Total current liabilities 1,759,360 1,048,319
Non-current liabilities:
Long-term debt and capital lease obligations,
less current maturities 483,272 761,981
--------------------- -------------------
Total non-current liabilities 483,272 761,981
Commitments -0- -0-
--------------------- -------------------
Total liabilities 2,242,632 1,810,300
Stockholders' equity:
Common stock - $.001 par value; 20,000,000 shares Authorized,
4,787,762 and 4,723,594 shares Issued and outstanding as of
November 30, 1998 and February 28, 1998, respectively. 4,788 4,723
Capital in excess of par value 5,276,209 5,010,134
Retained earnings (322,470) (909,902)
---------------------
-------------------
Total stockholders' equity 4,958,527 4,104,955
--------------------- -------------------
Total liabilities and stockholders' equity $ 7,201,159 $ 5,915,255
===================== ===================
</TABLE>
<PAGE>
<TABLE>
MARKET GUIDE INC.
Statement of Operations
(Unaudited)
<CAPTION>
For the 3 Months Ended For the 9 Months Ended
------------------------------------------ ---------------------------------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1998 1997 1998 1997
(Restated) (Restated)
------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
Revenues:
Database vendors $ 1,473,390 $ 1,229,699 $ 4,322,432 $ 3,682,997
Market Guide products 733,296 405,414 2,000,639 990,319
Print product 11,929 11,014 34,191 40,184
------------- ----------------- --------------- ---------------
Total revenues 2,218,615 1,646,127 6,357,262 4,713,500
Expenses:
Salaries, payroll taxes & employee 981,554 788,318 2,850,218 2,451,368
benefits
Database and product costs 230,360 91,772 520,723 279,069
General and administrative 285,393 218,925 839,698 661,985
Depreciation 117,916 86,994 327,637 244,014
Amortization 98,084 92,971 287,539 263,784
Advertising and promotion 41,113 34,882 115,991 116,644
------------- ----------------- --------------- ---------------
Total expenses 1,754,420 1,313,862 4,941,806 4,016,864
------------- ----------------- --------------- ---------------
Income from operations 464,195 332,265 1,415,456 696,636
Interest income 7,331 4,373 19,716 16,937
Interest expense 21,465 21,975 71,175 61,227
------------- ----------------- --------------- ---------------
Income before income taxes 450,061 314,663 1,363,997 652,346
Provision for income taxes 7,201 -0- 19,120 2,000
------------- ----------------- --------------- ---------------
Income from continuing operations 442,860 314,663 1,344,877 650,346
Income from discontinued operations (233,810) (297,170) (757,447) (756,571)
Net income $ 209,050 $ 17,493 $ 587,430 $ (106,225)
Earnings per share - Basic:
Continuing operations 0.09 0.07 0.28 0.14
Discontinued operations (0.05) (0.07) (0.16) (0.16)
Total $ 0.04 $ 0.00 $ 0.12 $ (0.02)
Earnings per share - Diluted:
Continuing operations 0.09 0.07 0.27 0.14
Discontinued operations (0.05) (0.07) (0.15) (0.16)
Total $ 0.04 $ 0.00 $ 0.12 $ (0.02)
Weighted average number of shares outstanding:
Basic 4,769,487 4,713,709 4,754,247 4,710,560
Diluted 4,969,587 4,753,709 4,965,964 4,741,287
</TABLE>
<PAGE>
<TABLE>
MARKET GUIDE INC.
Statements of Cash Flows
(Unaudited)
<CAPTION>
For the 9 Months Ended
---------------------------------------------------------
Nov. 30, Nov. 30,
1998 1997
(Restated)
---------------------- --------------------
<S> <C> <C>
Income from continuing operations $ 1,344,877 $ 650,346
---------------------- --------------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 615,176 507,798
Changes in assets and liabilities:
(Increase)/Decrease in accounts receivable (412,551) (263,535)
(Increase)/Decrease in prepaid assets (9,444) 143,990
(Increase)/Decrease in deposits and other assets 911 2
Increase/(Decrease) in accounts payable 262,658 87,156
Increase/(Decrease) in unearned revenues 356,549 268,856
---------------------- --------------------
Total adjustments 813,299 744,267
---------------------- --------------------
Net cash provided by continuing operations 2,158,176 1,394,613
Discontinued operations (943,841) (618,951)
---------------------- --------------------
Net cash provided by operating activities 1,214,335 775,662
Cash Flows From Investing Activities:
Payments for purchase of fixed assets (524,504) (450,357)
Payments for leasehold improvements (11,940) (4,201)
Development of computer software and
Product enhancements (542,071) (823,412)
Investing activities of discontinued operations (123,528) (307,469)
---------------------- --------------------
Net cash used by investing activities (1,202,043) (1,585,439)
---------------------- --------------------
Cash Flows From Financing Activities:
Payments for capital leases and equipment line of (186,873) (133,079)
credit
Proceeds from issuance of employee's stock plan 191,140 24,789
Proceeds from stock options exercised 75,000 -0-
Proceeds from line of credit -0- 379,630
---------------------- --------------------
Net cash provided by financing activities 79,267 271,340
---------------------- --------------------
Net increase/(decrease) in cash 91,559 (538,437)
Cash at beginning of period 809,618 1,230,893
---------------------- --------------------
Cash at end of period $ 901,177 $ 692,456
====================== ====================
</TABLE>
<PAGE>
Market Guide Inc.
Notes to Financial Statements
November 30, 1998
Note 1 INTERIM FINANCIAL STATEMENTS
The accompanying financial statements of Market Guide Inc. have been prepared
without audit. 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 nine months ended November 30, 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
As of August 31, 1998, the Company 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 paid 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.
Note 4 DISCONTINUED OPERATIONS
In September 1998, Market Guide sold New Generation Foods, Inc. an option to
purchase the CreditRisk Monitor division (formed in September 1996) from Market
Guide. On December 29, 1998, New Generation Foods gave Market Guide written
notice of its intent to exercise the option together with a signed Asset
Purchase Agreement. The closing is expected to occur in January 1999. All the
financials in this 10-Q treat Market Guide's CreditRisk Monitor division as a
discontinued operation.
<PAGE>
Note 4 DISCONTINUED OPERATIONS (continued)
Selected Financials of the CreditRisk Monitor Division
<TABLE>
<CAPTION>
For the 3 Months Ended For the 9 Months Ended
------------------------------------------ -------------------------------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1998 1997 1998 1997
-------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Earned Revenues $ 245,812 $ 97,168 $ 667,440 $ 155,121
-------------- ----------------- --------------- -------------
Total revenues 245,812 97,168 667,440 155,121
Expenses:
Salaries, payroll taxes and employee 279,306 244,793 835,959 520,893
benefits
Database and product costs 32,003 19,420 101,832 42,891
General and administrative 95,691 72,735 274,220 152,545
Depreciation 16,871 10,256 42,434 24,397
Amortization 19,620 19,620 58,859 52,319
Advertising and promotion 36,131 27,514 111,583 118,647
-------------- ----------------- --------------- -------------
Total expenses 479,622 394,338 1,424,887 911,692
-------------- ----------------- --------------- -------------
Income before income taxes (233,810) (297,170) (757,447) (756,571)
Provision for income taxes -0- -0- -0- -0-
-------------- ----------------- --------------- -------------
Net income (233,810) (297,170) (757,447) (756,571)
</TABLE>
Business Description
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.
CreditRisk Monitor is expected to be sold to New Generation Foods in January
1999.
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 99% 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 sale of printed products.
The Market Guide Database covers 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. 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:
o 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;
o 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;
o 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
o Developing efficient, timely, cost-effective and easy to use software
delivery systems such as Market Guide for Windows(TM) and our 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 four channels: The
Internet, online information vendors, Market Guide for Windows(TM)
(its proprietary analytic software) and a print publication.
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 a subscription based service. 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 November 1998, the 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;
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 Market commentary (in
partnership with Briefing); 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 several private label or co-branded sites for the 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 subscription
component when Market Guide introduces subscription based services.
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 a relationship with over 90 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; Global Market Information; 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.; Lycos; Motley Fool; 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; 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), also known as MGW, is a CD/Rom based analytic and
reference product targeted at institutional 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
by weekly, biweekly, monthly or quarterly subscriptions.
The same MGW software with about 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. StockQuest is the most powerful screening application
available on the web today.
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:
o The company has been acquired in a merger or a leveraged buyout;
o The company has not filed a financial statement with the Securities
and Exchange Commission for two or more reporting periods;
o The company has exhibited significant deterioration in its financial
condition;
o The company has been deleted from the National Association of
Security Dealers Automatic Quotation System ("Nasdaq") and has fewer
than three Market Makers;
o 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.
Discontinued Operations -- CreditRisk Monitor
CreditRisk Monitor ("CRM"), is an 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. (OTCBB symbol: NGNF).
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.
On December 29, 1998, New Generation Foods delivered written notice of its
intent to exercise its option and executed an Asset Purchase Agreement. Assuming
the transaction is completed, Market Guide will restate its financial results
for fiscal years 1997, 1998 and 1999. Financial results presented in this Form
10-Q filing for the periods ending November 30, 1997 and February 28, 1998 have
been restated treating the CRM division as a discontinued operation.
Market Guide expects to recognize a pretax gain from the sale of the CRM
division of more than $1.0 million including accumulated depreciation, a portion
of which may be deferred over the term of the purchase and sale agreement.
Business Facilities
In October 1994, the Company relocated its principal place of business to 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>
Market Guide Inc.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
November 30, 1998
For the three months ended November 30, 1998 compared to November 30, 1997
Total revenues for the three months ended November 30, 1998 increased 35% to
$2,218,615 from a restated $1,646,127 for the three months ended November 30,
1997. The growth in revenues reflects a 20% increase to $1,473,390 from database
vendor sales and an 81% rise to $733,296 in Market Guide proprietary product
sales.
All of the Company's business segments contributed to the increase in revenues.
Internet revenues continued to grow faster than the overall corporate average in
the third quarter. This reflects the servicing of over sixty (up from more than
forty in the prior quarter) Internet redistribution agreements, "co-branded"
arrangements and advertising fees generated at Market Guide's website
(www.marketguide.com). Market Guide's previously announced decision to make its
website free to all users since May 1998 has resulted in an 11% compound monthly
sequential increase in traffic compared to levels experienced prior to the
commencement of the promotion. Market Guide has decided to extend the promotion
into the first calendar quarter of 1999.
Market Guide's core base of sales through its online vendor channels contributed
to corporate growth as its vendors continued to enhance their services, create
new products and aggressively market them to end users. Management expects that
over time, as Internet revenues grow, the more traditional online vendor
revenues will represent a declining percentage of total Company revenues. Market
Guide for WindowsTM sales increased nearly 17% in the current quarter compared
to the same period one year ago.
Total operating expenses for three months ended November 30, 1998 increased 34%
to $1,754,420 from a restated $1,313,862 in the three months ended November 30,
1997. The increase in operating expenses reflects costs associated with a higher
employee count, increased royalty payments to third parties for the content they
provide primarily for the Market Guide Internet site and higher overhead
expenses.
Income from operations for three months ended November 30, 1998 increased 40% to
$464,195 from a restated $332,265 in the three months ended November 30, 1997.
The improvement in income from operations reflects growth from existing
customers, the addition of new vendors primarily in the Internet marketplace,
and tight cost control measures.
Interest income for three months ended November 30, 1998 increased 68% to
$7,331. The increase reflects higher cash balances in the quarter, partially
offset by lower prevailing interest rates.
Interest expense for three months ended November 30, 1998 decreased 2% to
$21,465. The slight decrease reflects reduced balances outstanding on older,
higher interest rate leases.
Income from continuing operations for the three months ended November 30, 1998
increased 41% to $442,860 compared to a restated $314,663 in three months ended
November 30, 1997.
Loss from discontinued operations declined 21% to $233,810 compared to
$297,170 in the three months ended November 30, 1997.
<PAGE>
For the nine months ended November 30, 1998 compared to November 30, 1997
Total revenues for the nine months ended November 30, 1998 increased 35% to
$6,357,262 from a restated $4,713,500 for the nine months ended November 30,
1997. The growth in revenues reflects a 17% increase to $4,322,432 in database
vendor sales and a 102% rise to $2,000,639 in Market Guide product sales.
All of the Company's business segments contributed to the increase in revenues.
Internet revenues continued to grow faster than the overall corporate average in
the nine month period just ended. This reflects the servicing of over sixty
Internet redistribution agreements, "co-branded" arrangements and advertising
fees generated at Market Guide's website (www.marketguide.com).
Market Guide for WindowsTM sales increased approximately 54% in the nine
month period ended November 30, 1998 compared to the same period one year ago.
Total operating expenses for nine months ended November 30, 1998 increased 23%
to $4,941,806 from a restated $4,016,864 in the nine months ended November 30,
1997. The increase in operating expenses reflects costs associated with a higher
employee count, increased royalty payments to third parties for the content they
provide primarily for the Market Guide Internet site and higher overhead
expenses.
Income from operations for the nine months ended November 30, 1998 rose 103% to
$1,415,456 compared to a restated $696,636 in the nine months ended November 30,
1997. The improvement in income from operations reflects growth from existing
customers, the addition of new vendors primarily in the Internet marketplace,
and tight cost control measures.
Interest income for nine months ended November 30, 1998 increased 16% to
$19,716. The increase reflects higher cash balances in the nine month period,
partially offset by lower prevailing interest rates.
Interest expense for the nine months ended November 30, 1998 increased 16% to
$71,175. The increase in interest expense reflects higher borrowing levels.
Income from continuing operations for the nine months ended November 30, 1998
rose 107% to $1,344,877 compared to a restated $650,346 in the nine months
ended November 30, 1997.
Loss from discontinued operations increased slightly to $757,447 compared to
$756,571 in the nine months ended November 30, 1997. Discontinued operations
represent the CreditRisk Monitor division which is scheduled to be sold in
January 1999. CreditRisk Monitor's revenues continue to increase steadily,
however operating expenses continue to exceed recognizable revenue.
Liquidity and Capital Resources
As of November 30, 1998, the Company's working capital (current assets less
current liabilities) decreased 28% to $506,206 from a restated $703,693 as of
February 28, 1998. The Company's cash and cash equivalents increased 11% to
$901,177 from $809,618 as of February 28, 1998.
For the nine months ended November 30, 1998, net cash provided by continuing
operations increased 55% to $2,158,176 compared to a restated $1,394,613 for the
nine months ended November 30, 1997. Net cash provided by operating activities
increased 57% to $1,214,335 compared to a restated $775,662 for the nine months
ended November 30, 1997. The increase reflects a $694,531 rise in income from
continuing operations to $1,344,877 and higher depreciation and amortization
expenses.
For the nine months ended November 30, 1998, net cash used in investing
activities decreased 24% to $1,202,043 compared to a restated $1,585,439 for the
nine months ended November 30, 1997. The decrease reflects the Company's
completion of several product development and MIS projects.
For the nine months ended November 30, 1998, net cash from financing activities
decreased 71% to $79,267 compared to $271,340 for the nine months ended November
30, 1997. The decline reflects an absence of equipment financing for the nine
months ended November 30, 1998.
The Company did not engage in any new borrowing during the first nine months
ended November 30, 1998.
The Company believes its current liquidity is sufficient to meet its obligations
during the next twelve months.
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.
Year 2000 Compliance
Market Guide has completed an assessment of its internal systems, proprietary
software and products, and the Company believes its products, systems and
software are ready for the change occurring January 1, 2000. The Company has
initiated the next phase of rigorous and systematic testing of all aspects of
its business. Market Guide has also made suitable inquiries of its mission
critical suppliers and redistributors seeking their assessments of progress
regarding Y2K readiness. Market Guide cannot make any representations on their
behalf, and the Company has not formed any opinion as to their state of Y2K
readiness.
As of the November 1998 10-Q filing date, the following states of readiness
are believed to exist for the subject areas:
Products:
Market Guide's products will not be changed as a result of the Year 2000
Readiness Program. Formats for all data elements in each of its product files
will not change. Most 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 will
be rigorously tested. Some test data may be available for client testing in
early 1999.
Production Processes and Application Software:
Market Guide is currently designing and building a separate test production
environment. This environment will be used to ensure that in-house systems are
year 2000 ready, and will enable the Company to identify those third party
information providers who are also year 2000 ready. Testing will begin early in
1999 and the test environment will not be dismantled until well into the year
2000. This will permit the Company to address any unanticipated problems that
may arise.
Internal Administrative Systems:
All hardware, systems software, third party application software, and outside
services are being evaluated for year 2000 readiness. To ensure that there will
be no business disruption due to year 2000 issues; telephone systems, security
badge readers, personal computers, accounting systems, etc. are being rigorously
tested.
Expenses to be incurred in the year 2000 readiness effort are unknowable at this
time, but are not believed to represent a material expense over all. All
maintenance and modification costs will be expensed as incurred.
<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)
January 14, 1998 /s/ HOMI M. BYRAMJI
Date
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