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, 1998
Commission File Number 0-24634
TRACK DATA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
22-3181095
(I.R.S. Employer Identification No.)
56 PINE STREET
NEW YORK, NY 10005
(Address of principal executive offices)
(212) 422-4300
(Registrant's telephone number)
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, 1998 there were
14,638,868 shares of common stock outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
- -------- ----------------------
Item I. Financial Statements
---------------------
See pages 2-6
Item 2. Management's Discussion and Analysis of Financial Condition and
-------------------------------------------------------------------
Results of Operations
-------------------
See pages 7-9
PART II. OTHER INFORMATION
- --------- ------------------
See page 10
<PAGE>
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
Unaudited Derived
from audited
financial
statements
ASSETS
CASH $ 346,350 $ 579,214
ACCOUNTS RECEIVABLE - net 1,499,136 1,955,142
FIXED ASSETS - net 8,542,572 8,876,718
INVESTMENT IN AFFILIATE 887,285 741,285
DUE FROM RELATED PARTIES 80,557 246,867
EXCESS OF COST OVER NET ASSETS ACQUIRED 3,171,341 3,312,613
NET DEFERRED INCOME TAX ASSETS 565,000 585,000
OTHER ASSETS 2,375,754 2,015,792
----------- -----------
TOTAL $17,467,995 $18,312,631
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 4,098,078 $ 4,408,042
Note payable - bank 971,961 2,373,199
Notes payable - other 667,725 664,824
Capital lease obligations 3,084,341 3,121,502
Other liabilities 361,012 1,115,631
----------- -----------
Total liabilities 9,183,117 11,683,198
----------- -----------
STOCKHOLDERS' EQUITY (Note 3)
Common stock - $.01 par value; 30,000,000 shares authorized;
Issued and outstanding - 14,659,368 shares in 1998 and
14,308,967 shares in 1997 146,594 143,090
Additional paid-in capital 15,813,215 14,417,325
Foreign currency translation adjustment 11,572 22,999
Deficit (7,686,503) (7,953,981)
----------- -----------
Total stockholders' equity 8,284,878 6,629,433
----------- -----------
TOTAL $17,467,995 $18,312,631
=========== ===========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
----------- -----------
REVENUES $23,269,873 $23,811,813
----------- -----------
OPERATING COSTS AND EXPENSES:
Direct operating costs 12,926,913 12,887,682
Selling and administrative expenses 9,771,539 9,587,032
Interest expense - net 277,942 382,875
----------- -----------
Total 22,976,394 22,857,589
----------- -----------
INCOME BEFORE INCOME TAXES AND EQUITY
IN NET INCOME (LOSS) OF AFFILIATE 293,479 954,224
INCOME TAXES 172,000 351,391
----------- -----------
INCOME BEFORE EQUITY IN NET INCOME (LOSS)
OF AFFILIATE 121,479 602,833
EQUITY IN NET INCOME (LOSS) OF AFFILIATE 146,000 (770,000)
----------- -----------
NET INCOME (LOSS) $ 267,479 $ (167,167)
=========== ===========
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE (Note 4) $.02 $(.01)
==== =====
WEIGHTED AVERAGE SHARES OUTSTANDING 14,400,000 14,683,000
=========== ===========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
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REVENUES $11,454,213 $11,894,000
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OPERATING COSTS AND EXPENSES:
Direct operating costs 6,420,740 6,344,946
Selling and administrative expenses 4,920,937 4,906,338
Interest expense - net 135,190 181,801
----------- -----------
Total 11,476,867 11,433,085
----------- -----------
(LOSS) INCOME BEFORE INCOME TAXES AND
EQUITY IN NET INCOME (LOSS) OF AFFILIATE (22,654) 460,915
INCOME TAXES 26,709 140,884
----------- -----------
(LOSS) INCOME BEFORE EQUITY IN NET INCOME (LOSS)
OF AFFILIATE (49,363) 320,031
EQUITY IN NET INCOME (LOSS) OF AFFILIATE 90,000 (664,000)
----------- -----------
NET INCOME (LOSS) $ 40,637 $ (343,969)
=========== ===========
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE (Note 4) $ - $ (.02)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 14,505,000 14,614,000
=========== ===========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 267,479 $ (167,167)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 1,906,570 1,878,440
Equity in net (income) loss of affiliate (146,000) 770,000
Deferred income taxes 20,000 351,391
Other (12,049) (281)
Changes in operating assets and liabilities:
Accounts receivable 456,006 (51,302)
Other assets (142,744) (35,381)
Accounts payable and accrued expenses (309,964) 689,344
Other liabilities (683,396) (33,351)
----------- -----------
Net cash provided by operating activities 1,355,902 3,401,693
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (350,920) (349,953)
Repayment of related party loans 173,597 128,104
Loans to related parties (7,287) (475,043)
Loans from (to) others (13,423) 35,795
----------- -----------
Net cash used in investing activities (198,033) (661,097)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments under capital lease obligations (1,007,955) (1,430,811)
Net payments on note payable - bank (1,401,238) (571,817)
Net proceeds from notes payable - other 2,901 (6,969)
Net proceeds on loans from employee savings program 31,966 13,430
Purchase of treasury stock (319,014) (476,420)
Payments of acquisition notes - (125,000)
Proceeds from exercise of stock options 1,318,409 -
----------- -----------
Net cash used in financing activities (1,374,931) (2,597,587)
----------- -----------
EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH (15,802) (5,325)
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NET (DECREASE) INCREASE IN CASH (232,864) 137,684
CASH, BEGINNING OF PERIOD 579,214 65,689
----------- -----------
CASH, END OF PERIOD $ 346,350 $ 203,373
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 249,410 $ 371,898
Income taxes 783,366 17,363
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Equipment acquisitions financed by capital leases $ 924,130 $ 483,787
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
TRACK DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(unaudited)
1. 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, 1998, and the results of operations for the three and six month
periods ended June 30, 1998 and 1997 and of cash flows for the six months ended
June 30, 1998 and 1997. The results of operations for the six months ended June
30, 1998 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, 1997 included in
the Company's Annual Report on Form 10-K. The accounting policies used in
preparing these financial statements are the same as those described in the
December 31, 1997 financial statements.
2. On November 7, 1997, the Company's Chairman and principal stockholder
contributed to the Company for no consideration his 100% ownership interest in
NewsWare, Inc. which provides on-line news services to its customers. The
results of operations for the three and six months ended June 30, 1997 have been
restated to give effect to the combination of Newsware, Inc. and the Company
which has been accounted for similar to a pooling of interests.
3. During the six months ended June 30, 1998 the Company purchased and
retired 209,720 shares for $319,014.
4. In April 1998, the Company granted options to purchase 390,000 shares of
its common stock at $3.00 per share. Further, in April and May 1998 options to
purchase 560,121 shares were exercised at prices of $2.00-$3.00 aggregating net
proceeds to the Company of $1,318,409.
<PAGE>
TRACK DATA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company provides real-time financial market data, fundamental research,
charting, and analytical services to institutional and individual investors
through dedicated telecommunication lines and the Internet. It also
disseminates news and third party database information from more than 100
sources worldwide. The Company's main products include MarkeTrack,
MarkeTrack98, Track OnLine, Dial/Data, NewsWatch, NewsWeb, myTrack and ProTrack.
Track Data's AIQ Systems division offers expert systems software, including
artificial intelligence products for market timing and stock selection.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
Revenues for the three months ended June 30, 1998 and 1997 were $11,454,213
and $11,894,000, respectively.
Direct operating costs were $6,420,740 for the second quarter of 1998 and
$6,344,946 for the similar period in 1997. Direct operating costs as a
percentage of revenues was 56% in 1998 and 53% in 1997. 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 $4,920,937 and $4,906,338 in the
1998 and 1997 periods, respectively. Selling expenses are expected to increase
during the remainder of 1998 as there has been recent additions to sales and
customer support personnel and increased media advertising for the Company's new
myTrack and ProTrack Internet based products. Selling and administrative
expenses as a percentage of revenues was 43% in the 1998 period and 41% in the
1997 period.
Interest expense decreased to $135,190 in the 1998 period compared to
$181,801 in 1997 due to decreased borrowings.
As a result of the above mentioned factors, the Company realized a loss of
$49,363 in 1998 and income of $320,031 in 1997 before equity in net income
(loss) from an affiliate.
The equity in income from an affiliate was $90,000 in the 1998 period as
compared to a loss from that affiliate of $664,000 in the 1997 period. The loss
included a significant charge by the affiliate for restructuring costs and an
asset impairment write-down.
Net income was $40,637 for the 1998 quarter as compared to a net loss of
$343,969 for the 1997 quarter.
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Revenues for the six months ended June 30, 1998 and 1997 were $23,269,873
and $23,811,813, respectively.
Direct operating costs were $12,926,913 for the first six months of 1998
and $12,887,682 for the similar period in 1997. Direct operating costs as a
percentage of revenues was 56% in 1998 and 54% in 1997.
Selling and administrative expenses were $9,771,539 and $9,587,032 in the
1998 and 1997 periods, respectively. Selling and administrative expenses as a
percentage of revenues was 42% in 1998 and 40% in 1997. The dollar and
percentage increase primarily reflects an increase in marketing expenses.
Interest expense decreased to $277,942 in the 1998 period compared to
$382,875 in 1997 due to decreased borrowings.
As a result of the above mentioned factors, the Company realized income
before equity in net income (loss) from an affiliate of $121,479 in the 1998
period compared to $602,833 in 1997.
The equity in income from an affiliate was $146,000 in the 1998 period
compared with a loss from such affiliate of $770,000 in the 1998 period. The
1997 loss included a significant charge by the affiliate for restructuring costs
and an asset impairment write-down.
Net income was $267,479 for the six months ended June 30, 1998 compared
with a net loss of $167,167 for the six months ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1998 and 1997 cash provided by
operating activities was $1,355,902 and $3,401,693, respectively. The decrease
was due principally to $780,000 of taxes paid in the six months ended June 30,
1998, as well as accounts payable which decreased by $309,964 in 1998 compared
with an increase of $689,344 in the same period in 1997. Cash flows used in
investing activities was $198,033 and $661,097 for the six months ended June 30,
1998 and 1997, respectively. Loans to related parties decreased by
approximately $468,000. Cash used in financing activities was $1,374,931 and
$2,597,587 for the six months ended June 30, 1998 and 1997, respectively. The
decrease in 1998 compared to 1997 is primarily due to cash received from the
exercise of stock options in 1998.
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 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 customer requirements.
The Company has initiated a program to prepare computer systems and
applications for the Year 2000. The Company expects to incur internal staff
costs as well as consulting and other expenses related to infrastructure and
facilities enhancements necessary to prepare the systems for the Year 2000. A
portion of such costs are not likely to be incremental costs to the Company, but
rather will represent the redeployment of existing information technology
resources. The Company is also communicating with customers and suppliers with
whom it conducts business to help identify and resolve the Year 2000 issue. It
is possible that if all aspects of the Year 2000 issues are not adequately
resolved by these parties, the Company's future business operations and, in
turn, its financial position and results of operations could be negatively
impacted. Management has not yet quantified the Year 2000 compliance and other
related expenses, however, management believes these costs will not have a
material affect on its financial position.
INFLATION AND SEASONALITY
To date, inflation has not had a significant impact on the Company's
operations. The Company's services are generally terminable by its customers
at-will. The Company's revenues are not affected by seasonality.
<PAGE>
- ------
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.
--------
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K. There were no reports on Form 8-K
-------------------
filed during the second quarter of 1998
<PAGE>
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
/s/ 8/12/98
-------------------------- -------
Barry Hertz
Chairman of the Board
Chief Executive Officer
/s/ 8/12/98
------------------------- -------
Martin Kaye
V.P. Finance, Principal
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 346,350
<SECURITIES> 0
<RECEIVABLES> 1,499,136
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,542,572
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,467,995
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 146,594
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,467,995
<SALES> 0
<TOTAL-REVENUES> 23,269,873
<CGS> 0
<TOTAL-COSTS> 22,976,394
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 277,942
<INCOME-PRETAX> 293,479
<INCOME-TAX> 172,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 267,479
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 203,373
<SECURITIES> 0
<RECEIVABLES> 1,693,933
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,910,973
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,812,550
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 145,083
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 18,812,550
<SALES> 0
<TOTAL-REVENUES> 23,811,813
<CGS> 0
<TOTAL-COSTS> 22,857,589
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 382,875
<INCOME-PRETAX> 954,224
<INCOME-TAX> 351,391
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (167,167)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
