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 MARCH 31, 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) 943-4555
(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 April 30, 1998 there
were 14,616,202 shares of common stock outstanding.
<PAGE>
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PART I. FINANCIAL INFORMATION
- -------- ----------------------
Item 1. Financial Statements
---------------------
See pages 2-5
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-------------------------------------
See pages 6-7
PART ll. OTHER INFORMATION
- --------- ------------------
See page 8
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TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
MARCH 31, DECEMBER 31,
1998 1997
Unaudited Derived
from
audited
financial
ASSETS statements
CASH AND EQUIVALENTS $ 286,230 $ 579,214
ACCOUNTS RECEIVABLE - net 1,538,846 1,955,142
FIXED ASSETS - net 8,596,990 8,876,718
INVESTMENT IN AFFILIATE 797,285 741,285
DUE FROM RELATED PARTIES 134,668 246,867
EXCESS OF COST OVER NET ASSETS ACQUIRED 3,241,977 3,312,613
NET DEFERRED INCOME TAX ASSETS 565,000 585,000
OTHER ASSETS 2,313,591 2,015,792
------------ -------------
TOTAL $17,474,587 $ 18,312,631
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 4,598,525 $ 4,408,042
Note payable - bank 2,188,798 2,373,199
Notes payable - other 663,845 664,824
Capital lease obligations 2,887,361 3,121,502
Other liabilities 557,579 1,115,631
------------ -------------
Total liabilities 10,896,108 11,683,198
------------ -------------
STOCKHOLDERS' EQUITY (Notes 3 and 4)
Common stock - $.01 par value; 30,000,000 shares authorized;
issued and outstanding - 14,131,867 shares in 1998 and
14,308,967 shares in 1997 141,319 143,090
Additional paid-in capital 14,149,083 14,417,325
Foreign currency translation adjustment 15,217 22,999
Deficit (7,727,140) (7,953,981)
------------ -------------
Total stockholders' equity 6,578,479 6,629,433
------------ -------------
TOTAL $17,474,587 $ 18,312,631
============ =============
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
----------- -----------
REVENUES $11,815,660 $11,917,813
----------- -----------
OPERATING COSTS AND EXPENSES:
Direct operating costs 6,506,173 6,542,736
Selling and administrative expenses 4,850,602 4,680,694
Interest expense - net 142,752 201,074
----------- -----------
Total 11,499,527 11,424,504
----------- -----------
INCOME BEFORE INCOME TAXES
AND EQUITY IN NET INCOME (LOSS) OF AFFILIATE 316,133 493,309
INCOME TAXES 145,291 210,507
----------- -----------
INCOME BEFORE EQUITY IN NET INCOME (LOSS)
OF AFFILIATE 170,842 282,802
EQUITY IN NET INCOME (LOSS) OF AFFILIATE 56,000 (106,000)
----------- -----------
NET INCOME $ 226,842 $ 176,802
=========== ===========
BASIC AND DILUTED NET INCOME PER SHARE $.02 $.01
==== ====
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 14,228,000 14,751,000
=========== ===========
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 226,842 $ 176,802
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 953,987 936,471
Equity in net (income) loss of affiliate (56,000) 106,000
Deferred income taxes 20,000 209,874
Other 3,827 (3,146)
Changes in operating assets and liabilities:
Accounts receivable 416,296 215,652
Other assets (328,761) (161,715)
Accounts payable and accrued expenses 190,483 656,180
Other liabilities (582,725) 28,028
--------- -----------
Net cash provided by operating activities 843,949 2,164,146
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (255,423) (202,413)
Repayment of related party loans 112,857 16,762
Loans to related parties (658) (59,133)
Loans (to) from others (25,683) 23,474
--------- -----------
Net cash used in investing activities (168,907) (221,310)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments under capital lease obligations (520,774) (717,056)
Net payments on note payable - bank (184,401) (893,997)
Net payments on notes payable - other (978) (69,275)
Purchase of treasury stock (270,013) (72,206)
Net receipts (payments) on loans from employee savings program 22,639 (9,526)
--------- -----------
Net cash used in financing activities (953,527) (1,762,060)
--------- -----------
EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH (14,499) 3,330
--------- -----------
NET (DECREASE) INCREASE IN CASH (292,984) 184,106
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 579,214 65,589
--------- -----------
CASH AND EQUIVALENTS, END OF PERIOD $ 286,230 $ 249,695
========= ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 129,894 $ 190,815
Income taxes 682,365 13,995
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Equipment acquisitions financed by capital leases $ 284,838 $ 259,604
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
TRACK DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 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 March 31, 1998, and the results of operations and of cash flows for the
three months ended March 31, 1998 and 1997. The results of operations for the
three months ended March 31, 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 months ended March 31, 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 three months ended March 31, 1998 the Company purchased and
retired 177,100 shares for $270,013.
4. In April 1998, the Company granted options to purchase 360,000 shares
of its common stock at $3.00 per share. Further, in April 1998 options to
purchase 514,955 shares were exercised at prices of $2.00-$3.00 aggregating
net proceeds to the Company of $1,238,410.
<PAGE>
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, Dial/Data, Track OnLine, NewsWatch, NewsWeb, and
myTrack. Its AIQ Systems division provides expert systems software, including
artificial intelligence products for market timing and stock selection.
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Revenues for the three months ended March 31, 1998 and 1997 were
$11,815,660 and $11,917,813, respectively.
Direct operating costs were $6,506,173 for the first three months of 1998
and $6,542,736 for the similar period in 1997. Direct operating costs as a
percentage of revenues was 55% in each period. 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 $4,850,602 and $4,680,694 in the
1998 and 1997 periods, respectively, an increase of 4%. Selling and
administrative expenses as a percentage of revenues was 41% in 1998 and 39% in
1997. The dollar and percentage increase primarily reflects an increase in
payroll and marketing expenses.
Interest expense decreased to $142,752 in the 1998 period compared to
$201,074 in 1997 due to decreased borrowings.
As a result of the above mentioned factors, the Company realized net
income before equity in net income (loss) from an affiliate of $170,842 in the
1998 period compared to $282,802 in 1997.
In 1998, the equity in net income from an affiliate was $56,000 compared
to 1997, which included equity in a net loss from such affiliate of $106,000.
In 1998, the Company owned 14% of the affiliate as compared to 28% in 1997.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1998 and 1997, cash provided by
operating activities was $843,949 and $2,164,146, respectively. The decrease
was due principally to $682,365 of taxes paid in the three months ended March
31, 1998 as well as accounts payable which increased by $190,483 in 1998 as
compared to an increase of $656,180 in the same period in 1997. Cash flows
used in investing activities was $168,907 and $221,310 for the three months
ended March 31, 1998 and 1997, respectively. Cash used in financing activities
was $953,527 and $1,762,060 for the three months ended March 31, 1998 and
1997, respectively. The decrease in 1998 compared to 1997 is primarily due to
a repayment of bank loans in 1997.
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. None
------------------
Item 6. (a) Exhibits.
--------
Exhibit 27. Financial Data Schedule
(b) There were no reports on Form 8-K filed during the
first 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
Date: 5/13/98 /s/
------- ---------------------------
Barry Hertz
Chairman of the Board
Chief Executive Officer
Date: 5/13/98 /s/
------- ---------------------------
Martin Kaye
V.P. Finance
Principal Financial Officer
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 286,230
<SECURITIES> 0
<RECEIVABLES> 1,538,846
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,596,990
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,474,587
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 141,319
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<TOTAL-LIABILITY-AND-EQUITY> 17,474,587
<SALES> 0
<TOTAL-REVENUES> 11,815,660
<CGS> 0
<TOTAL-COSTS> 11,499,527
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 142,752
<INCOME-PRETAX> 316,133
<INCOME-TAX> 145,291
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 226,842
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
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<PERIOD-END> MAR-31-1997
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