<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
Commission File Number 0-24634
TRACK DATA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 22-3181095
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
56 PINE STREET
NEW YORK, NY 10005
(Address of principal executive offices)
(212) 422-4300
(Registrant's telephone number)
GLOBAL MARKET INFORMATION, INC.
(Former Name)
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 past 12 months (or 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of July 31, 1996 there
were 14,875,272 shares of common stock outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
See pages 2-8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
See pages 9-11
PART ll. OTHER INFORMATION
See page 12
1
<PAGE> 3
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, DECEMBER 31,
1996 1995
----------- -----------
ASSETS
CASH AND EQUIVALENTS $ 120,947 $ 2,004,827
ACCOUNTS RECEIVABLE - net 1,725,294 2,122,605
FIXED ASSETS - net 9,561,655 9,092,324
INVESTMENT IN AFFILIATE 2,818,989 2,705,155
MARKETABLE EQUITY SECURITIES (Note 1) - 324,979
DUE FROM RELATED PARTIES (Note 3) 722,959 2,609,078
EXCESS OF COST OVER NET ASSETS ACQUIRED 3,736,990 3,892,951
NET DEFERRED INCOME TAX ASSETS (Note 4) 1,535,748 1,037,419
OTHER ASSETS 2,468,383 2,461,026
----------- -----------
TOTAL $22,690,965 $26,250,364
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 4,797,518 $ 4,574,138
Note payable - bank 2,467,648 4,444,451
Notes payable - other 1,834,013 2,003,555
Capital lease obligations 4,434,723 4,528,312
Deferred compensation payable (Note 1) -- 3,877,571
Other liabilities 878,818 915,123
----------- -----------
14,412,720 20,343,150
----------- -----------
STOCKHOLDERS' EQUITY (Notes 1, 3 and 5)
Common stock - $.01 par value;
30,000,000 shares authorized;issued
and outstanding - 14,875,272 shares
in 1996 and 13,976,967 shares in 1995 148,753 139,770
Additional paid-in capital 14,049,972 9,958,640
Unrealized gain on available-for-sale
securities (Note 4) - 174,801
Foreign currency translation adjustment 54,737 59,517
Deficit (5,975,217) (4,425,514)
----------- -----------
Total stockholders' equity 8,278,245 5,907,214
----------- -----------
TOTAL $22,690,965 $26,250,364
=========== ===========
<FN>
See notes to condensed consolidated financial statements
2
</TABLE>
<PAGE> 4
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
----------- -----------
REVENUES $23,394,909 $22,267,989
----------- -----------
OPERATING COSTS AND EXPENSES:
Direct operating costs 12,768,425 12,615,527
Selling and administrative expenses 10,095,139 10,800,108
Deferred compensation expense (Note 1) 294,894 (168,577)
Interest expense - net 442,514 362,816
----------- -----------
Total 23,600,972 23,609,874
----------- -----------
LOSS FROM OPERATIONS (206,063) (1,341,885)
----------- -----------
OTHER INCOME:
Gain on securities 288,418 223,744
Other income - 2,819
----------- -----------
288,418 226,563
----------- -----------
INCOME (LOSS) BEFORE INCOME TAX BENEFIT
AND EQUITY IN NET INCOME OF AFFILIATE 82,355 (1,115,322)
INCOME TAX BENEFIT (Note 4) (364,058) (368,325)
----------- -----------
INCOME (LOSS) BEFORE EQUITY IN NET INCOME
OF AFFILIATE 446,413 (746,997)
EQUITY IN NET INCOME OF AFFILIATE 92,582 193,227
----------- -----------
NET INCOME (LOSS) $ 538,995 $ (553,770)
=========== ===========
NET INCOME (LOSS) PER SHARE $.04 $(.04)
==== =====
WEIGHTED AVERAGE SHARES OUTSTANDING 14,426,000 13,977,000
=========== ===========
<FN>
See notes to condensed consolidated financial statements
3
</TABLE>
<PAGE> 5
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
----------- -----------
REVENUES $11,626,615 $11,186,856
----------- -----------
OPERATING COSTS AND EXPENSES:
Direct operating costs 6,098,811 6,311,308
Selling and administrative expenses 5,203,719 5,079,712
Deferred compensation expense (Note 1) - (107,163)
Interest expense - net 219,806 192,092
----------- -----------
Total 11,522,336 11,475,949
----------- -----------
INCOME (LOSS) FROM OPERATIONS 104,279 (289,093)
----------- -----------
OTHER INCOME:
Gain on securities - 99,173
Other income - (2,236)
----------- -----------
- 96,937
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT)
AND EQUITY IN NET INCOME OF AFFILIATE 104,279 (192,156)
INCOME TAXES (BENEFIT) (Note 4) 47,000 (64,429)
----------- -----------
INCOME (LOSS) BEFORE EQUITY IN NET INCOME
OF AFFILIATE 57,279 (127,727)
EQUITY IN NET INCOME OF AFFILIATE 3,500 103,081
----------- -----------
NET INCOME (LOSS) $ 60,779 $ (24,646)
=========== ===========
NET INCOME (LOSS) PER SHARE $ - $ -
=== ===
WEIGHTED AVERAGE SHARES OUTSTANDING 14,875,000 13,977,000
=========== ===========
<FN>
See notes to condensed consolidated financial statements
4
</TABLE>
<PAGE> 6
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1996
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
UNREALIZED
GAIN ON FOREIGN
ADDITIONAL AVAILABLE- CURRENCY
COMMON PAID-IN FOR-SALE TRANSLATION
STOCK CAPITAL SECURITIES ADJUSTMENT DEFICIT
BALANCE,
JANUARY 1, 1996 $139,770 $ 9,958,640 $ 174,801 $ 59,517 $(4,425,514)
Foreign currency
translation
adjustment (4,780)
Appreciation in
investment in
affiliate 21,252
Dividend paid to
Track S
corporation
stockholder (2,088,698)
Gain on transfer
of Innodata
shares to Trust (174,801)
Issuance of common
stock to Trust
in satisfaction
of Track Phantom
Stock Plan
obligation 8,359 3,836,703
Issuance of common
stock in
satisfaction
of bonus
obligation 624 233,377
Net income 538,995
-------- ----------- ---------- ---------- -----------
BALANCE,
JUNE 30, 1996 $148,753 $14,049,972 $ - $ 54,737 $(5,975,217)
======== =========== ========== ========== ===========
<FN>
See notes to condensed consolidated financial statements
5
</TABLE>
<PAGE> 7
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 538,995 $ (553,770)
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation and amortization 1,680,787 2,289,227
Equity in net income of affiliate (92,582) (193,226)
Deferred compensation 294,893 (168,576)
Profit sharing and charitable
contributions paid in stock
of affiliates - 289,983
Gain on contributions of stock of
affiliates - (130,071)
(Gain) loss on sale and transfer
of marketable securities (335,340) 105,108
Allowance for decline in market
value of securities 46,922 5,876
Deferred income taxes (498,329) (382,334)
Changes in operating assets
and liabilities:
Accounts receivable 397,311 81,705
Other assets 62,170 284,036
Accounts payable and
accrued expenses 457,380 (102,884)
Other liabilities (33,055) 92,565
----------- -----------
Net cash provided by
operating activities 2,519,152 1,617,639
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (532,663) (1,302,007)
Repayment of related party loans 639,673 1,950,642
Loans to related parties (900,509) (1,827,486)
Loans to others (30,743) (60,000)
Purchase of marketable securities (76,931) -
Proceeds from sale of marketable
securities - 26,436
Acquisition costs - (2,175,582)
----------- -----------
Net cash used in
investing activities (901,173) (3,387,997)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments under capital lease
obligations (1,404,863) (1,120,245)
Net payments on note payable - bank (1,976,803) (53,907)
Net proceeds from notes payable - other 13,713 18,674
Net (payments) proceeds on loans
from employee savings program (3,247) 59,671
Purchase of treasury stock - (23,566)
Payments of acquisition notes (125,000) (125,000)
----------- -----------
Net cash used in
financing activities (3,496,200) (1,244,373)
----------- -----------
EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH (5,659) (4,857)
----------- -----------
NET DECREASE IN CASH (1,883,880) (3,019,588)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 2,004,827 5,155,132
----------- -----------
CASH AND EQUIVALENTS, END OF PERIOD $ 120,947 $ 2,135,544
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for:
Interest $ 491,051 $ 474,885
Income taxes 16,149 79,464
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Equipment acquisitions financed
by capital leases $ 1,311,274 $ 2,123,894
<FN>
See notes to condensed consolidated financial statements
6
</TABLE>
<PAGE> 8
TRACK DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(unaudited)
1. On March 31, 1996, Track Data Corporation ("Track"), a principal
stockholder of Global Market Information, Inc. ("Global"), merged into Global
and the name of Global was changed to Track Data Corporation (the "Company").
Pursuant to the merger (the "Merger"), Global issued 12,000,000 shares of its
common stock in exchange for all of the outstanding stock of Track. The
1,599,837 shares of Global common stock owned by Track prior to the Merger
were cancelled.
Global, as the surviving corporation, assumed all of Track's assets,
liabilities and obligations. Effective March 31, 1996, the Company issued
835,905 shares of its common stock and transferred 74,281 shares of Innodata
Corporation common stock to a Trust to be held by a bank trustee for the
benefit of certain key employees and consultants of Track to satisfy
obligations under a deferred compensation plan maintained by Track. Upon
issuance of the shares to the Trust, the liability for the deferred
compensation was satisfied. These shares will be released to the participants
upon termination of employment, or earlier with approval of the Board of
Directors.
Track provided "real-time" financial market data, financial and
historical databases and analytic services through a sophisticated private
data network to the professional trading and investment community prior to the
Merger. Track also provided database services to Global pursuant to a
facilities management agreement that was to expire in 2001.
For accounting purposes the Merger is treated as a combination of
entities under common control similar to a pooling-of-interests. Accordingly,
the financial statements for all current and prior periods include the results
of operations of Global and Track.
2. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial position
as of June 30, 1996, and the results of operations for the three and six month
periods ended June 30, 1996 and 1995 and of cash flows for the six months
ended June 30, 1996 and 1995. The results of operations for the six months
ended June 30, 1996 are not necessarily indicative of results that may
be expected for any other interim period or for the full year.
These financial statements should be read in conjunction with the
financial statements and notes thereto for the year ended December 31, 1995
included in the Company's Current Report on Form 8-K/A dated as of March 26,
1996. The accounting policies used in preparing these financial statements
are the same as those described in the December 31, 1995 Track financial
statements.
7
<PAGE> 9
3. On March 26, 1996, in accordance with the Merger Agreement, a dividend
in the amount of $2,088,698 was paid to Track's sole stockholder, who is the
Company's Chairman of the Board, representing the undistributed earnings of
Track as an S corporation. The dividend was paid to the stockholder by
assigning amounts due from him or entities controlled by him.
4. Effective upon the Merger, deferred taxes which were previously
provided at state and local rates and which related to Track temporary
differences were recalculated based on the changed status to a C corporation.
This resulted in a recognition of additional deferred tax assets deemed
realizable by management of approximately $500,000 in the three months ended
March 31, 1996.
5. On April 23, 1996, the Company granted options to purchase 479,400
shares of the Company's common stock at $4.00 per share to employees ($3.75
market price at date of grant). On July 16, 1996, the Board of Directors
changed the option exercise price to $2.00 per share ($1.63 market price at
date of change). Further, the Company issued 62,400 shares of its common
stock (60,000 shares to its president) to satisfy certain bonus payments for
1995.
8
<PAGE> 10
TRACK DATA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
The Company provides real-time financial market data, fundamental research,
charting and analytical services to both institutional and individual
investors. The Company also redistributes news and third party data base
information from more than 100 sources worldwide. The Company's lead
products include MarkeTrack MX and MarkeTrack NT, Dial/Data, Track OnLine and
InfoVest. Its AIQ Systems division provides expert systems software,
including artificial intelligence products for market timing and stock
selection.
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
For the three months ended June 30, 1996 the Company's revenues were
$11,626,615, an increase of 4% over revenues for the similar period in 1995
of $11,186,856. The increase in revenues is primarily attributable to an
increase in the subscriber base for the Company's Dial/Data division.
Direct operating costs were $6,098,811 for the second quarter of 1996 and
$6,311,308 for the similar period in 1995, a decrease of 3%. Direct
operating costs as a percentage of revenues was 52% in 1996 and
56% in 1995. Direct operating costs include direct payroll, direct
telecommunication costs, computer supplies, depreciation and equipment lease
expense and the amortization of software development costs.
Selling and administrative expenses were $5,203,719 and $5,079,712 in the 1996
and 1995 periods, respectively, an increase of 2% in the 1996 period from the
1995 period. Selling and administrative expenses as a percentage of revenues
was 45% in each period.
The Company incurred no deferred compensation expense in 1996, while
recognizing a reduction in such expense of $107,163 in 1995. These changes
relate to the Company's phantom stock plan which was discontinued as of March
31, 1996. The underlying 835,905 shares of the Company's common stock and
74,281 shares of Innodata Corporation common stock to which certain employees
were vested have been placed in a trust for the benefit of the participants.
Accordingly, future changes in the market price of the respective stocks will
not be reflected as changes in deferred compensation expense.
Interest expense increased to $219,806 in the 1996 period compared to
$192,092 in 1995 due to increased borrowings.
9
<PAGE> 11
There was no other income in the three months ended June 30, 1996 and $96,937
for the three months ended June 30, 1995. The income in 1995 resulted
principally from gains from Innodata Corporation common stock given as
charitable contributions in 1995. The gain represents the difference between
the carrying value of such securities and the market price at date of
disposition.
As a result of the above mentioned factors, the Company realized net income of
$60,779 in the 1996 period compared to a loss of $24,646
in 1995, which included equity in net income of an affiliate of $103,081.
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
For the six months ended June 30, 1996 the Company's revenues were
$23,394,909, an increase of 5% over revenues for the similar period in 1995 of
$22,267,989. The increase in revenues is primarily attributable to an
increase in the subscriber base for the Company's Dial/Data division.
Direct operating costs were $12,768,425 for the first six months of 1996 and
$12,615,527 for the similar period in 1995, an increase of 1%. Direct
operating costs as a percentage of revenues was 55% in 1996 and 57% in 1995.
Selling and administrative expenses were $10,095,139 and $10,800,108 in the
1996 and 1995 periods, respectively, a decrease of 7% in the 1996 period from
the 1995 period. Selling and administrative expenses as a percentage of
revenues was 43% in 1996 and 49% in 1995. The dollar and percentage decrease
primarily reflects a contribution expense of approximately $200,000 in the
1995 period and a reduction of approximately $500,000 in salary expense for
the Company's Chairman in 1996 as compared to the 1995 period.
The Company incurred deferred compensation expense of $294,894 in 1996, while
recognizing a reduction in such expense of $168,577 in 1995. These changes
relate to the Company's phantom stock plan which was discontinued as of March
31, 1996. The underlying 835,905 shares of the Company's common stock and
74,281 shares of Innodata Corporation common stock to which certain employees
were vested have been placed in a trust for the benefit of the participants.
Accordingly, future changes in the market price of the respective stocks will
not be reflected as changes in deferred compensation expense.
Interest expense increased to $442,514 in the 1996 period compared to $362,816
in 1995 due to increased borrowings.
The loss from operations for the six months ended June 30, 1996 of $206,063
was due principally to the deferred compensation expense described above. The
loss of $1,341,885 in the 1995 period was due principally to the higher
selling and administrative expenses and lower revenues described above.
Other income was $288,418 and $226,563 for the six months ended June 30, 1996
and 1995, respectively, principally from gains in each period from Innodata
Corporation common stock placed in a trust to satisfy obligations to employees
10
<PAGE> 12
in 1996 and for charitable contributions in 1995. In each period the gain
represents the difference between the carrying value of such securities and
the market price at date of disposition.
The income tax benefit in the 1996 period of $364,058 is due to the
recognition of the anticipated realizable amount of tax benefits from a change
in tax status, effective upon the merger of Track at March 31, 1996, from an S
corporation, for which the majority of taxes were paid by the former sole
stockholder, to a C corporation.
As a result of the above mentioned factors, the Company realized net income of
$538,995 in the 1996 period compared to a loss of $553,770 in 1995.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1996 and 1995 cash provided by operating
activities was $2,519,152 and $1,617,639, respectively. The increase was due
principally to profitable operations in 1996. Cash flows used in investing
activities was $901,173 and $3,387,997 for the six months ended June 30, 1996
and 1995, respectively. Purchases of fixed assets decreased by approximately
$800,000 in 1996 compared to 1995. The 1995 amount also includes the
acquisition of the All-Quotes business. Cash used in financing activities
was $3,496,200 and $1,244,373 for the six months ended June 30, 1996 and 1995,
respectively. The increase in 1996 is primarily due to a repayment of bank
loans.
The Company has a line of credit with a bank. The line is collateralized by
the assets of the Company and is guaranteed by its principal stockholder.
Interest is charged at 1.75% above the bank's prime rate and is due on demand.
The Company may borrow up to 80% of eligible accounts receivable and is
required to maintain a compensating balance of 10% of the outstanding loans.
The Company did not meet this requirement from time to time prior to the
Merger. The line of credit is sufficient for the Company's cash requirements.
There are no major capital expenditures anticipated beyond the normal
replacement of equipment and additional equipment to meet increased customer
demand.
Prior to the Merger, Track paid a dividend to its sole stockholder, Mr. Hertz,
of approximately $2,100,000, equivalent to the previously taxed income to Mr.
Hertz as the sole stockholder of Track, a subchapter S corporation. The
dividend was paid by assigning to Mr. Hertz receivables from him or entities
controlled by him. Further, Mr. Hertz has agreed to reduce compensation paid
to him by the Company from approximately $1,500,000 in 1995 to $350,000 for
each of 1996 and 1997.
INFLATION AND SEASONALITY
To date, inflation has not had a significant impact on the Company's
operations. The Company's revenues are not affected by seasonality.
11
<PAGE> 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Not Applicable
Item 2. Changes in Securities. Not Applicable
Item 3. Defaults upon Senior Securities. Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders. Not
Applicable.
Item 5. Other Information. Not Applicable.
Item 6. (a) Exhibits. None.
(b) Reports on Form 8-K. None.
12
<PAGE> 14
SIGNATURES
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.
TRACK DATA CORPORATION
Date: 8/12/96 /s/
-----------------------
Barry Hertz
Chairman of the Board
Chief Executive Officer
Date: 8/12/96 /s/
-----------------------
Martin Kaye
V.P. Finance, Principal Financial Officer
<PAGE> 15
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
[ARTICLE] 5
[CIK] 0000903651
[NAME] INNODATA CORPORATION
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] JUN-30-1996
[CASH] 120,947
[SECURITIES] 0
[RECEIVABLES] 1,725,294
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 0
[PP&E] 9,561,655
[DEPRECIATION] 0
[TOTAL-ASSETS] 22,690,965
[CURRENT-LIABILITIES] 0
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 148,753
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 22,690,965
[SALES] 0
[TOTAL-REVENUES] 23,394,909
[CGS] 12,768,425
[TOTAL-COSTS] 23,600,972
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 442,514
[INCOME-PRETAX] 82,355
[INCOME-TAX] (364,058)
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 538,995
[EPS-PRIMARY] .04
[EPS-DILUTED] 0
</TABLE>
