UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QA
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarter: March 31, 1996 Commission File Number: 33-22264-FQ
MARKET DATA CORP.
_________________________________________________________________
(Exact name of registrant as specified in its charter)
TEXAS 76-0252235
_________________________________________________________________
(State or other jurisdiction (I.R.S. Employer incorporation
of organization) or Identification No.)
14505 Torrey Chase Blvd., Suite 410,
Houston, Texas 77014
_________________________________________________________________
(Address of principal executive offices) (Zip Code)
(713) 586-8686
_________________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
Requirements for the past 90 days.
X Yes No
_____ _____
The number of shares outstanding of each of the issuer's
classes of stock, as of March 31, 1996, are as follows:
Class of Securities Shares Outstanding
___________________ __________________
Common Stock,
$.001 par value 16,756,000
INDEX
MARKET DATA CORP.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets (Unaudited):
As of March 31, 1996 and June 30, 1995 3
Statements of Operations (Unaudited):
For the Three Months and the Nine Months Ended
March 31, 1996 and 1995 5
Statement of Cash Flows (Unaudited):
For the Nine Months Ended March 31, 1996
and 1995 7
Notes to Financial Statements:
As of March 31, 1996 (Unaudited) 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Change in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security
Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
<TABLE>
MARKET DATA CORP
BALANCE SHEET
(Unaudited)
<S> <C> <C>
March 31, June 30,
1996 1995
___________ ___________
ASSETS
Current Assets
Cash and Cash equivalents $ 100,311 $ 136,103
Certificate of deposit 100,000 100,000
Origination fees receivable 0 15,860
Franchise fees receivable 356,643 379,493
Other receivables and advances 117,818 113,121
Mortgage loans held for sale 2,097,702 1,186,236
Prepaid expenses 55,600 39,231
Inventory 5,152 4,715
Receivable from InfoPlan 42,569 190,732
___________ ___________
Total current assets 2,875,795 2,165,491
Non-current assets
Franchise fees receivable,
less current maturities 581,279 581,279
Note receivable from InfoPlan 168,826 168,826
Officer receivable 54,861 55,322
Investment in equity securities 24,000 24,000
___________ ___________
Total non-current assets 828,966 829,427
Office furniture and equipment, net 152,784 253,411
Goodwill, net 100,799 109,781
Customer data base, net 0 7,897
Other assets 5,178 3,678
___________ ___________
Total assets $3,963,522 $3,369,685
=========== ===========
</TABLE>
See notes to financial statements
<TABLE>
<S> <C> <C>
March 31, June 30,
1996 1995
LIABILITIES ___________ ___________
Current liabilities
Mortgage warehouse
Credit facility $2,097,702 $1,186,236
Current maturities of
capital lease obligations 10,088 61,564
Current maturities and
long-term debt 2,260 8,761
Accounts payable and
accrued expenses 741,914 550,267
Notes payable to bank 250,000 250,000
Notes payable to individual 0 22,000
Unearned revenue 13,750 0
___________ ___________
Total current liabilities 3,115,714 2,078,828
Long-term liabilities
Capital lease obligations, less
current maturities 31,825 37,646
Long-term debt, less current
maturities 40,230 30,231
___________ ___________
Total long-term liabilities 72,055 67,877
___________ ___________
Total liabilities 3,187,769 2,146,705
___________ ___________
STOCKHOLDERS' EQUITY
Common Stock; $.001 par value;
50,000,000 shares authorized
16,756,000 and 16,611,000 shares
issued and outstanding at
March 31, 1996 and June 30, 1995,
respectively 16,756 16,611
Additional paid in capital 1,575,466 1,517,751
Retained earnings (816,469) (311,382)
___________ ___________
Total stockholders' equity 775,753 1,222,980
___________ ___________
$3,963,522 $3,369,685
=========== ===========
</TABLE>
See notes to financial statements
MARKET DATA CORP.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
March 31 March 31
1996 1995 1996 1995
___________ ___________ ___________ ___________
Revenues
Text service $ 92,340 $ 96,131 $ 289,141 $ 281,983
Loan origination
fees 488,580 671,800 1,740,947 2,656,669
Gains on sales of
mortgage loans 151,317 486,552 402,039 1,031,404
Initial franchise
Sales 0 166,875 11,340 501,025
Other fees & income 17,733 58,437 106,165 251,482
___________ ___________ ___________ ___________
Total revenue 749,970 1,479,795 2,549,632 4,722,563
Operating expenses
Operating costs 3,854 51,300 40,314 154,933
Franchise comm. 57,054 198,044 408,236 816,482
Salaries & related
benefits 378,208 425,706 1,044,253 1,398,253
Loan officer comm. 253,487 502,719 681,867 1,385,194
Marketing 6,598 29,356 33,042 111,233
Other loan
processing costs 25,883 54,975 146,197 229,895
Merger expenses 31,613 0 62,654 0
Other general &
administrative 198,619 254,168 645,538 849,254
___________ ___________ ___________ __________
Total operating
expenses 955,316 1,516,268 3,062,101 4,945,244
___________ ___________ ___________ ___________
Operating (loss) (205,346) (36,473) (512,469) (222,681)
Other income (expenses)
Interest income 48,924 11,853 157,293 44,196
Interest expense (58,250) (17,594) (157,142) (32,651)
Other 0 24,653 6,964 38,557
___________ ___________ ___________ ___________
Total other (9,326) 18,912 7,115 50,102
___________ ___________ ___________ ___________
(Loss) before taxes (214,672) (17,561) (505,354) (172,579)
Provision for
income taxes
(benefit) 0 (18,385) 0 (20,385)
___________ ___________ ___________ ___________
Net income (loss) $(214,672) $ 824 $(505,354) $(152,194)
=========== =========== =========== ===========
Net income (loss)
per Common
Share $ (.013) $ 0 $ (.030) $ (.009)
=========== =========== =========== ===========
Weighted average
Shares
Outstanding 16,756,000 16,297,000 16,756,000 16,297,000
=========== =========== =========== ===========
</TABLE>
See notes to financial statements
MARKET DATA CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<S> <C> <C>
Nine Months Ended
March 31
1996 1995
___________ ___________
Cash Flows from Operating Activities
Net income $(505,354) $(152,179)
MDC net income for the quarter ended
June 30 268 906
___________ ___________
Adjusted net income (505,086) (151,273)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and amortization 108,679 107,185
Stock issued in lieu of
compensation 28,800 0
Stock issued for interest 2,200 0
Loss on disposition of fixed asset 9,647 0
Changes in assets and liabilities
(Increase) decrease in:
Receivables 10,314 41,539
Receivable - InfoPlan 148,163 (89,366)
Mortgage loans held for sale,
net of advances 0 (79,460)
Prepaid expenses (16,369) 7,342
Inventory (437) (99)
Other real estate owned 0 76,250
Income tax refund claim 24,161 45,839
Receivable (1,500) 0
Other assets
Increase (decrease) in:
Accounts payable and
accrued expenses 191,647 137,446
Income tax payable 0 (168,000)
Unearned revenue 13,750 0
___________ ___________
Net cash provided by (used In)
Operating activities 13,969 (72,597)
Cash Flows from Investing Activities
Purchase of office furniture
and equipment (820) (15,255)
Advance on note receivable - InfoPlan 0 (16,563)
Deposits 0 11,198
___________ ___________
Net cash used in investing activities (820) (20,620)
Cash Flows from Financing Activities
Proceeds from notes payable to a bank 0 250,000
Note payable to an individual 0 9,137
Principle payments on capital lease
obligations (57,297) (61,738)
Principle payment on debt (18,502) 0
Net proceeds from issuance of
common stock 26,858 23,900
Net proceeds from issuance of
preferred stock 0 7,250
Preferred stock redeemed 0 (3,250)
Cash dividends paid 0 (19,256)
___________ __________
Net cash provided by (used In)
Financing activities (48,941) 206,043
___________ ___________
Net increase (decrease) in cash (35,792) 112,826
Cash and cash equivalents -
Beginning of period 136,103 47,530
___________ ___________
Cash and cash equivalents -
End of period $ 100,311 $ 160,356
=========== ===========
Schedule of Investing and
Financing Activities:
Increase in mortgage loans
held for sale $ 911,466 $1,812,380
Increase in mortgage
warehouse credit facility (911,466) (1,732,920)
----------- -----------
Net Increase $ 0 $ 79,460
=========== ===========
</TABLE>
See notes to financial statements
MARKET DATA CORP.
NOTE TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the interim period.
Such results are not necessarily indicative of a full year's
operation.
On March 1, 1996, Market Data Corp. acquired Renet Financial
Corporation. (See Part II, Item 5.) The combined balance sheets and
statements of operations were derived from the historical balance
sheets and statements of operations of Market Data Corp. and Renet
Financial Corp. The balance sheet reflects the exchange of
11,167,000 shares of common stock of the Company for all the
outstanding common and preferred shares of Renet.
The acquisition was accounted for as a pooling in accordance with
generally accepted accounting principles. Accordingly, the results
of operations of Renet from July 1, 1995, will be included in the
Company's results of operations for the year ended June 30, 1996.
As a result of the acquisition of Renet, the Company changed their
fiscal year end from March 31 to June 30 to coincide with Renet's
fiscal year end. (See Part II, Item 6.) Such a change in the fiscal
year end is subject to ratification by the shareholders of Market
Data Corp. The Company has designated the period April 1, 1995
through June 30, 1995, to be its transition period for financial
reporting purposes, as required by Section 12 of the Securities and
Exchange Act of 1934. The Company plans to file a transition report
on Form 10-Q for the transition period. Audited financial
information for the transition period will be included in the Form
10-K that will be filed for the fiscal year ended June 30, 1996.
The following is a summary of the operations of Market Data Corp. for
the three months ended June 30, 1995:
<TABLE>
<S> <C>
Revenue $118,307
Operating Expenses
Operating Cost $ 48,745
Other General
and Administrative $ 69,294
__________
$118,039
__________
Net Income $ 268
==========
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation
Liquidity and Capital Resources.
During the nine-month period ended March 31, 1996, the Company
experienced a net decrease in cash of $35,792. Of this amount,
$13,969 was provided from Operating Activities, while $820 was used
for Investing Activities and $48,941 was used in Financing
Activities. Operating Activities included a $148,163 collection on
the accounts receivable from InfoPlan and a $191,647 increase in
accounts payable. Financing Activities included $57,297 for
principal payments of capital lease obligations of Renet. Investing
Activities included $820 for the purchase of office equipment. The
current ratio decreased form 1.04 at June 30, 1995 to .92 at March
31, 1996.
During the nine-month period ended March 31, 1995, the Company
experienced an increase in cash of $112,826. Of this amount $72,597
was used in Operating Activities, $20,620 was used in Investing
Activities, while $206,043 was provided by Investing Activities.
Operating Activities included a decrease in accounts receivable of
$41,539, and an increase in accounts receivable from InfoPlan of
$89,366. Accounts payable also increased $137,446 and Income Tax
Payable decreased $168,000. The Investing Activities included
$15,255 for purchase of office equipment, an increase in the note
receivable of InfoPlan of $16,563, and a decrease in deposits of
$11,198. Financing Activities included loan proceeds received by
Renet of $259,137 and payments made by Renet on capital lease
obligations of $61,738.
During the nine months period ended March 31, 1996, there were
significant decreases in all areas of revenue except for the text
service which incurred a slight increase in revenue. Although costs
and expenses also decreased, the Company still sustained a negative
cash flow.
The Company has incurred significant legal and accounting fees for
the acquisition of Renet. As of March 31, 1996, merger expenses
totaled $62,654. These expenses will be funded from current
operations.
The capital expenditures for the current year are anticipated at
$15,000. These expenditures will include upgrading the computer
systems for the Text Service. Funding for these expenditures will be
from current operations. For periods beyond one year, the capital
budget requirements will largely depend upon the availability of
cash. The Renet division, may in the near future, require capital
expenditures to purchase software and technology related to the
mortgage banking industry.
Results of Operations
During the three-months ended March 31, 1996 (the quarter), the
Company generated revenues of $749,970, as compared to gross revenues
of $1,479,795 for the same period of the previous year, a decrease of
49%. The following is an analysis of revenue by major category with
related changes from the same period of the previous year:
<TABLE>
<S> <C> <C> <C> <C>
Mar 31, Mar 31, Net Change
1996 1995 Amount Percent
__________ __________ __________ _________
Text Service $ 92,340 $ 96,131 $ (3,791) (3.9)
Loan Origination
fees $ 488,580 $ 671,800 $(183,220) (27.3)
Gains on Sales of
Mortgage Loans $ 151,317 $ 486,552 $(335,235) (68.9)
Initial Franchise
Sales $ 0 $ 166,875 $(166,875) (100.0)
Other Fees $ 17,733 $ 58,437 $ (40,704) (69.7)
</TABLE>
During the nine-months ended March 31, 1996, the Company generated
revenues of $2,549,632 as compared to gross revenue of $4,722,563 for
the same period of the previous year, a decrease of 46%. The
following is an analysis of revenue by major category with related
changes from the same period of the previous year:
<TABLE>
<S> <C> <C> <C> <C>
Mar 31, Mar 31, Net Change
1996 1995 Amount Percent
__________ __________ __________ _________
Text Service $ 289,141 $ 281,983 $ 7,158 2.5
Loan Origination
fees $1,740,947 $2,656,669 $(915,722) (34.5)
Gains on Sales of
Mortgage Loans $ 402,039 $1,031,404 $(629,365) (61.0)
Initial Franchise
Sales $ 11,340 $ 501,025 $(489,685) (97.7)
Other Fees $ 106,165 $ 251,482 $(145,317) (57.8)
</TABLE>
Market Data Corp. - Houston
Operating costs decreased 92% and 74% respectively for the quarter
and nine months ended March 31, 1995, as compared to the same period
of the previous year. This significant reduction was due to he
Company no longer aggressively pursuing software sales. All
advertising costs have been eliminated. Any income received from
software sales is included in other fees and income. Other fees and
income decreased 70% for the quarter and 58% for the nine months
period, as compared to the same periods of the previous year, due to
the drastic reduction in software sales. The Company also incurred
significant one-time expenses related to the merger with Renet.
Text Service Division
In October, 1991, the Company started the development of a new
division called Text Service. This service is a digest of today's
leading investment advisors' market analysis. This digest is
broadcast daily to customers of Data Broadcasting Corporation,
Bonneville Market Information Company, Global Market Information,
Inc., and Data Transmission Network Corporation. This product of the
Text Service division is called MarketLine.
On March 24, 1993, the Company signed an agreement with Prodigy
Services Company to broadcast a product to Prodigy subscribers called
the Wall Street Edge. Broadcasting of this product commenced in
April, 1993. Also in June 1995, Wall Street by Fax, Inc. (WSBF) a
New York City based provider of fax-on demand financial information,
began advertising the Company's financial digest,under the name Wall
Street Whispers.
The Text Service division had a gross profit of $64,575 for the
three-months ended March 31, 1996 (the quarter), as compared to gross
profit of $71,210, for the same period of the previous year, a
decrease of 9%. For the nine-months ended March 31, 1996, the Text
Service had a gross profit of $204,149 as compared to gross profit of
$203,370, for the same period of the previous year, and increase of
.4%.
Management is currently evaluating data received from a subscriber
satisfaction survey. The information obtained from this assessment
will be used to improve the text product and subscriber retention,
which hopefully will lead to an increased subscriber base.
The Company has recently retained Alliance Internet Marketing of
Nashville, Tennessee, to assist the Text Service division in the
design and implementation of a web site. Typically, subscribers
access the service via a third party vendor, such as Prodigy, and
subscription revenue is shared. The web site will facilitate direct
subscription to the Text Service's products through the Internet,
allowing the Company to receive 100% of the subscription revenue.
This division continues to contribute significantly to the overall
gross profit of the Company. Management will continue to explore
opportunities in the on-line service area.
Renet Financial Division
Renet is a franchise based mortgage lending company which provides
financial services in the State of California. Renet provides
mortgage lending services as a broker/banker to franchisees and
customers, which include originating, processing, and funding
mortgage loans, that are subsequently sold to the secondary market.
In 1995, Renet introduced two new financial services that provide
funding and placement of equity based credit lines and Second Trust
Deeds and which complement and enhance the growth of the financial
services offered to the market.
Renet offers two levels of affiliation. The first level of
affiliation offers licensed brokers the availability of funding only
conventional or VA loans. The licensed broker operates
independently. The broker pays Renet a royalty fee of 15% of the
loan fees upon completion of each loan transaction. The second level
of affiliation is the participation by the affiliate as an employee
of Renet in the capacity as a Branch Manager who is allowed to fund
conventional, VA and FHA loans. Corporate administration and all
expenses related to the branch office are the responsibility of
Renet. The Branch Manager receives the net proceeds of each
completed loan transaction. Renet also receives royalty payments and
origination fees for the funding and placement of mortgage loans. In
the event Renet funds the loan directly from its funding division, it
will also receive funding fees. These fees are categorized as a gain
(loss) on sales.
Renet is a qualified Veterans Administration ("VA") Automatic Lender
and is approved under the VA Lender Appraisal Processing Program
("LAPP"). RENET also holds a Consumer Finance Lender ("CFL") license
from the California Department of Corporations.
Renet was a qualified Title I and Title II Non-supervised Mortgagee
("Direct Endorsement Lender") under the regulations promulgated by
the U.S. Department of Housing and Urban Development ("HUD"). This
qualification enabled Renet to originate, process, fund and broker
applications for FHA insured and guaranteed mortgage loans. This
approval did not extend to the Company's franchised offices.
As a condition of that qualification, the Company was required to
conform to certain HUD regulations and a net worth requirement of
$250,000. On March 25, 1996, Renet received from HUD, Notice of
Violation and Notice of Intent to Request Civil Money Penalty dated
March 20, 1996. The annual audit of Renet's FHA loans, conducted
January 1996, found the following violations of HUD-FHA requirements:
1) failure to implement and maintain an adequate Quality Control Plan
for the origination of HUD-FHA insured mortgages; 2) failure to
comply with HUD report requirements under the Home Mortgage
Disclosure Act for the year 1994; 3) failure to remit up front
mortgage insurance premiums to HUD within 15 days from the date of
loan closing and failure to remit late charges and interest
penalties; 4) failure to submit loans to HUD for endorsement in a
timely manner; 5) use of MIP funds to close HUD-FHA insured
mortgages; 6) failure to report to HUD that Renet had suffered a loss
of more than 20 percent of its net worth in 1994 and, 7) failure to
document the sources of funds used to close insured mortgages.
On April 19, 1996, Renet responded to the Notice of Violation and
Notice of Intent to Request Civil Money Penalty. On May 28, 1996,
Renet received notice from HUD, dated May 23, 1996, that their
authority to lend through HUD-FHA loan programs had been withdrawn
for a period of three years due to violations of HUD regulations. In
addition, HUD has proposed to seek $50,000 in civil penalties. Renet
has thirty days in which to seek a hearing to review these findings,
and will do so in an effort to have these penalties reduced.
For the fiscal year ending June 30, 1995, total loans originated
under the FHA Title II program suspended by HUD was $5,179,710 and
gross loan origination fees from the origination of such loans was
$200,614 (5.3% of total gross loan origination fees). For the nine
months ending March 31, 1996, total loans originated under the FHA
Title II program suspended by HUD was $8,984,631 and gross loan
origination fees from the origination of such loans was $279,756
(16.1% of total gross loan origination fees).
For the three months (the quarter), and the nine months ended
March 31, 1996, this division experienced significant decreases in
operating revenue, as compared to the same periods of the previous
year. Loan origination fees decreased 27% and 34%, respectively, for
the quarter and nine month period. These decreases were due
primarily to the 1 1/2% increase in mortgage interest rates which
created a reduction in refinancing and equity loans.
There were also significant decreases in gains on sales of mortgage
loans, 69% for the quarter and 61% for the nine month period.
Interest rate increases also eliminate many marginal borrowers from
qualifying for a home loan. This affects Renet's primary franchises
(real estate offices) because they are unable to sell to the borrower
and fund the loan through the Renet franchise.
There were no initial franchise sales for the quarter, and only
$11,340 for the nine month period. Renet suspended marketing new
franchises because management felt it necessary to redirect any
available capital to the current operations.
The Renet division also experienced decreases in operating expenses
for the three month period (the quarter) and the nine month period
ended March 31, 1996, as compared to the same periods of the previous
year. Franchise commissions decreased 71% for the quarter and 50%
for the nine months. Loan officer commissions also decreased 50% and
51% for the quarter and nine month period, respectively. Franchise
and loan officer commissions are a direct result of the decrease in
funding loans.
Marketing costs decreased 78% for the quarter and 70% for the nine
months ended March 31, 1996, as compared to the same period of the
previous year. As previously stated, marketing costs were reduced to
redirect capital to the current operations.
Other loan processing costs decreased 53% and 36%, respectively, for
the quarter and nine-months ended March 31, 1996, as compared to the
same period of the previous year. These decreases can also be
attributed to the reduction in loan activity, as well as the closing
of branch operations.
The decrease in other general and administrative expenses are the
result of cost reduction programs that have been implemented by the
management of the Renet division, including the closing of branch
offices. Management is continuing to stream-line operations, and is
hopeful this will lead to a decrease in operating losses. Other
general and administrative expenses also include the related expenses
of the Houston office administration. These expenses have also
declined due to management's efforts to reduce costs.
Salaries and related benefits decreased 11% and 25%, respectively,
for the quarter and nine month period ended March 31, 1996. These
decreases are a direct result of reductions in personnel. Management
is currently examining personnel requirements to determine whether
other cost cutting measures may be implemented. Also, effective May
1996, several officers voluntarily reduced their base salaries. This
expense area will continue to be closely monitored for cost savings.
Salaries and related benefits also include the expenses for the
Houston office, which remained relatively unchanged.
Renet has a $7.0 million warehouse credit line, which is used solely
for the funding of loans, and a $250,000 revolving credit line, which
is used for working capital. The bank requires that $100,000 be held
as collateral for the revolving credit line.
Renet's future operations will be dependent upon a variety of
factors, including the maintenance of a warehouse line of credit.
The amount of credit available under the terms of this warehouse line
of credit is based upon the ratio of a percentage of the Company's
assets to net worth. It is used solely for the purpose of funding
loans. In order to increase the warehouse credit line, it is
necessary to increase assets. The Company anticipates that it may be
required to secure additional capital to fund growth, if any. The
financial stability of this division is also dependent upon the
successful marketing of its financial services to wholesale brokers,
the licensing of new franchises and retail loan operations, and the
retirement of long-term debt obligations as a result of the
restructuring of the division's operations.
In addition to these factors, the state of the economy, legislation,
and regulatory requirements play a major role in the mortgage lending
industry. These factors are dependent upon numerous elements beyond
the control of the Renet; however, management must be ready to adapt
to these changes as they occur.
Net Income
For the three-months ended March 31, 1996 (the quarter) the Company
incurred a net loss of $214,672 as compared to net income of $824 for
the same period of the previous year. This decrease is due primarily
to the decline in Renet's revenues and the additional merger expenses
incurred by the Company.
The Company incurred a net loss of $505,354 for the nine-months ended
March 31, 1996, as compared to a net loss of $152,194 for the same
period of the previous year. Again, this loss is attributed to the
decline in operating revenues. Management is anticipating the
operating expenses of the Renet division to decrease as cost
reduction measures begin to take affect.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
InfoPlan International, Inc.
InfoPlan International, Inc. failed to meet the terms of the
repayment schedule previously agreed to on November 4, 1994. On June
16, 1995 demand was made for repayment, in full of all monies owed
the Company by InfoPlan. On September 25, 1995 the Complaint was
filed in Federal Court.
Michael J. Wing, President of InfoPlan, signed an Agreed Judgement
for actual damages in the amount of $358,394.82, attorney fees in the
amount of $9,442.13, pre-judgment interest in the amount of $6,598.39
and post-judgment interest at the rate allowed by law. The Agreed
Judgment, entered on November 27, 1995, was final as of December 27,
1995. Mr. Wing was notified by legal counsel, Sheinfeld, Maley &
Kay, Houston, Texas, on January 10, 1996, that MDC was prepared to
abstract judgment in each county where Mr. Wing or InfoPlan owns
property, and to file a writ of execution and bill of sale.
On February 9, 1996, Mr. Steven C. Naremore, on behalf of MDC, and
Mr. Michael J. Wing, on behalf of InfoPlan, signed a Covenant Not To
Execute. On February 12, 1996, MDC received a payment from InfoPlan
in the amount of $147,000.00. The balance of principal, $211,394.82,
attorney fees, pre-judgment interest, and post-judgment interest will
be paid in installments on May 31, 1996, July 31, 1996, and Sept. 30,
1996. If InfoPlan fails to meet any of the installments, the Agreed
Judgment may be executed without notice.
Market Data Corp. of New York
On July 17, 1995, the Company received a proposed Settlement
Agreement from Market Data Corporation (MDC) of New York, who
previously had contacted the Company regarding a potential "name"
conflict. MDC of New York asserted that their use of the name
preceded the Company's use by a matter of months and had requested
the Company consider a name change. On October 27, 1995, the
settlement agreement was accepted and signed by Steven C. Naremore,
President. The agreement provides the Company $27,500, in two
installments of $13,750 each, to cover related expenses. On December
8, 1995, the first installment was received. To avoid legal action,
by either party, the Company has agreed to change its name to Renet
Financial Services Corporation, pending shareholder approval.
Current Legal Matters Concerning Renet Financial Division
The following is a list of stipulated judgments incurred by the Renet
division due to their downsizing and closing of branch offices:
1) WCB Thirteen Limited Partnership - For lease payments remaining
on the Anaheim office. Judgment is for $36,000, to be paid in three
payments beginning March 15, 1996. As of March 31, 1996, the balance
due was $24,000.
2) Mission Airport, Etc. - For lease payments remaining on the
Ontario office. Judgment is for $39,960, with payments of $2,220
beginning June 1995. As of March 31, 1996, the balance due was
$17,760.
3) Western Security Mortgage - For commission dispute. Judgment is
for $12,500, with payments of $750 beginning April 1, 1996.
4) Federal Express Corp. - For courier service. Judgment is for
$11,219.37, with payments of $1,000 per month beginning February
1996. As of March 31, 1996, the balance due was $9,219.37.
The Renet division also has two unresolved lawsuits as of March 31,
1996. Reed Printing filed an action on January 8, 1996, in Municipal
Court, State of California, for non-payment of printing services
totalling $22,291.07. Renet has disputed the amount owed and will
seek a settlement for a lesser amount. Morlin Management Corp. filed
an action on January 6, 1996, in Municipal Court, State of
California, in the amount of $27,589.95. This amount represents
lease payments on the Pasadena office which was closed. Renet
expects to settle this dispute for a lesser amount.
On March 25, 1996, Renet received from HUD, Notice of Violation and
Notice of Intent to Request Civil Money Penalty dated March 20, 1996.
The annual audit of Renet's FHA loans, conducted January 1996, found
the following violations of HUD-FHA requirements: 1) failure to
implement and maintain an adequate Quality Control Plan for the
origination of HUD-FHA insured mortgages; 2) failure to comply with
HUD report requirements under the Home Mortgage Disclosure Act for
the year 1994; 3) failure to remit up front mortgage insurance
premiums to HUD within 15 days from the date of loan closing and
failure to remit late charges and interest penalties; 4) failure to
submit loans to HUD for endorsement in a timely manner; 5) use of MIP
funds to close HUD-FHA insured mortgages; 6) failure to report to HUD
that Renet had suffered a loss of more than 20 percent of its net
worth in 1994 and, 7) failure to document the sources of funds used
to close insured mortgages.
On April 19, 1996, Renet responded to the Notice of Violation and
Notice of Intent to Request Civil Money Penalty. On May 28, 1996,
Renet received notice from HUD, dated May 23, 1996, that their
authority to lend through HUD-FHA loan programs had been withdrawn
for a period of three years due to violations of HUD regulations. In
addition, HUD has proposed to seek $50,000 in civil penalties. Renet
has thirty days in which to seek a hearing to review these findings,
and will do so in an effort to have these penalties reduced.
Item 2. Changes in Securities
None
Item 3. Defaults on Senior Securities
None
Item 4. Submission of Matters to a Vote of Securities Holders
None
Item 5. Other Information
Market Data Corp, (MDC), Market Data Acquisition Corp. ("MDAC"), a
California corporation and wholly-owned subsidiary of MDC, and Renet
Financial Corporation, a California corporation, entered into a plan
and Agreement of Merger (the "Plan") on October 2, 1995, to merge
Renet with and into MDAC (the "Merger"), with Renet becoming the
surviving corporation and wholly-owned subsidiary of MDC, and MDAC
ceasing operations.
The Merger was completed on March 1, 1996, and in accordance with the
Plan: 1) each outstanding share of Renet common stock was converted
in the right to receive 0.9403555 shares of MDC's common stock; 2)
each outstanding share of Renet preferred stock was converted into
the right to receive 5.642133 shares of MDC's common stock; 3) each
option currently outstanding to purchase shares of Renet common stock
was converted into the right to purchase .9403555 shares of MDC's
common stock; and 4) Renet became a wholly owned subsidiary of MDC.
The shareholders of RENET own 66.25% of the issued and outstanding
share of MDC following the Merger.
The Companies
Renet is a franchisor of financial services to real estate
brokerages, builders, developers, financial planners and tax
preparers who want to provide access to conventional, government
backed and home equity mortgage loans to their clients. Renet's
access to approximately 100 additional lenders, and a consumer
finance division, permits it to offer a broad range of products.
Renet is located in Orange, California.
MDC markets financial information systems, software and on-line
subscriptions of financial data. The financial information systems
are sold under a dealer arrangement with Data Broadcasting
Corporation ("DBC"), formerly FNN Data Broadcasting. MDC has also
secured dealer arrangements with several software companies to market
financial information and software analysis. MDC also develops
subscription-based daily financial text products that are marketed
throughout the financial community, and publishes a daily financial
information product known as "Wall Street Edge" for Prodigy Services
Company. The subscription fees, which range from $20-$50 per month,
are shared between MDC and the respective provider/carrier.
Source of Funds
No monetary consideration was exchanged in the merger. The merger
was combination of a pooling of interests of both parties. MDC
issued 11,167,255 shares of its common stock in exchange for each
outstanding share of Renet common stock, which was converted into the
right to receive 0.940355 shares of MDC's common stock, and each
outstanding share of Renet's preferred stock was converted into the
right to receive 5.642133 shares of MDC's common stock. Each option
currently outstanding to purchase shares of Renet common stock was
converted into the right to purchase shares of MDC's common stock,
with an appropriate adjustment in the number of shares covered by,
and the per share exercise price of each such option, for a total of
3,525,282 options being issued. Renet became a wholly-owned
subsidiary of MDC. The shareholders of Renet own 66.25% of the
issued and outstanding shares of MDC following the Merger.
The exchange ratio applicable to the merger was determined through
extensive, armslength negotiations between the management of MDC and
Renet, which originated in August 1994. The exchange ratio is based
upon the respective parties' objective and subjective assessments of
the relative value and prospects of Renet and MDC. In this regard,
MDC considered, among other factors, the assets, liabilities,
revenues, net revenues and relative market share of Renet, and the
long and short-term value to the Company to be able to offer the wide
range of financial services which are currently being offered by
Renet to its customers. In the value assessment of MDC, Renet
considered, among other factors, MDC's potential as a publicly held
corporation, to provide greater access to the capital markets than
that which had been available to Renet.
MDC engaged McFarland, Grossman & Company, Inc., a Houston based
investment banking firm, to assist the Company in assessing Renet's
value, and in the related negotiations between MDC and Renet.
McFarland, Grossman & Company, Inc. did not prepare a fairness
opinion, or any other written analysis or reports in connection with
its services. Each board did, however, consider internally prepared
analyses, both formal and informal.
On February 16, 1996, a fairness hearing was held by the Commissioner
of Department of Corporations, State of California, to determine the
fairness of the terms and conditions of the Merger. The Commissioner
determined at this meeting that the transaction between MDC and Renet
to be fair and equitable to the Renet shareholders.
Reasons for the Merger
In an effort to enhance shareholder value, the management of MDC
commenced an evaluation of privately held companies in the pursuit of
locating potential acquisition candidates. Through these efforts,
Renet was identified as a merger candidate and MDC commenced
negotiations for a business combination. The negotiations were
terminated by mutual consent on January 18, 1995, and subsequently
recommenced in June of 1995. The management of MDC believes that the
Merger will provide an opportunity for the growth and development of
MDC and significantly enhance its position in the marketplace,
through the expansion of assets, revenue base, employees, and lines
of business through the products and financial services that will be
offered as a result of the Merger. The combined products and
services offered include mortgage lending, insurance and financial
publishing.
Item 6. Exhibits and Reports on Form 8-K
A report was filed on Form 8-K on March 18, 1996, announcing that
Market Data Corp. had acquired Renet Financial Corporation, effective
March 1, 1996. This information was reported under Item 1, Changes
in Control of Registrant and Item 2, Acquisitions or Disposition of
Assets. It was also reported under Item 8, that the Company would be
changing its fiscal year end from March 31 to June 30, as a result of
the merger. Financial statement requirements for the Form 8-K were
filed June 13, 1996.
A report was filed on Form 8-K on June 7, 1996, announcing that Renet
Financial Corp. was found to be in violation of several Department of
Housing and Urban Development (HUD) requirements during a January
1996, annual audit performed by HUD (see Part II, Item 1., Legal
Proceedings).
Financial Data Schedule - Article 5 of Regulation S-X
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, as amended, the Registrant has caused this report to be signed
on its behalf by the undersigned duly authorized persons.
Market Data Corp.
(Registrant)
6/17/96 Steven C. Naremore
(signature)
6/17/96 Janice S. Whalen
(signature)
Financial Data Schedule - Article 5 of Regulation S-X
Article 5 of Regulation S-X
Period -Type 9 months
Fiscal Year End Jun-30-1996
Period - End Mar-31-1996
Cash 200,311
Securities 0
Receivables 474,461
Allowances 0
Inventory 5,152
Current - Assets 2,875,795
PP&E 575,714
Depreciation 422,930
Total - Assets 3,963,522
Current - Liabilities 3,115,714
Bonds 0
Common 16,756
Preferred - Mandatory 0
Preferred 0
Other - SE 758,997
Total Liability and Equity 3,963,522
Sales 2,549,632
Total - Revenues 2,713,889
CGS 2,353,909
Total Costs 3,062,101
Other Expenses 0
Loss Provision 0
Interest Expense 157,142
Income Pretax (505,354)
Income Tax 0
Income - Continuing (505,354)
Discontinued 0
Extraordinary 0
Changes 0
Net Income (505,354)
EPS Primary (.030)
EPS Diluted (.030)
