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, 2000
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, 2000 there were
63,600,688 shares of common stock outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
See pages 2-7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
See pages 8-10
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See page 10
PART ll. OTHER INFORMATION
See page 11
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
Derived
from
audited
financial
Unaudited statements
ASSETS
CASH AND EQUIVALENTS $ 4,170,441 $ 5,665,833
ACCOUNTS RECEIVABLE - net 1,550,719 1,541,217
MARKETABLE SECURITIES 4,855,500 3,675,240
FIXED ASSETS - net 6,169,961 6,680,952
INVESTMENT IN AFFILIATE 1,374,285 1,342,285
EXCESS OF COST OVER NET ASSETS ACQUIRED 2,644,067 2,747,523
NET DEFERRED INCOME TAX ASSETS 450,000 450,000
OTHER ASSETS 3,606,686 2,953,411
----------- -----------
TOTAL $24,821,659 $25,056,461
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 4,363,619 $ 4,352,959
Note payable - bank 2,312,539 2,535,056
Notes payable - other 779,972 762,083
Capital lease obligations 1,624,987 2,006,094
Other liabilities 376,303 403,459
----------- ------------
Total liabilities 9,457,420 10,059,651
----------- ------------
STOCKHOLDERS' EQUITY
Common stock - $.01 par value;
300,000,000 shares authorized;
issued and outstanding -
63,529,488 shares in 2000 and
63,070,056 shares in 1999 635,295 630,701
Additional paid-in capital 26,477,703 24,944,796
Accumulated other comprehensive income 2,913,300 2,205,144
Deficit (14,662,059) (12,783,831)
----------- ------------
Total stockholders' equity 15,364,239 14,996,810
----------- ------------
TOTAL $ 24,821,659 $ 25,056,461
============ =============
</TABLE>
See notes to condensed consolidated financial statements
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(unaudited)
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2000 1999
----------- ----------
REVENUES $12,890,331 $11,655,552
----------- -----------
COSTS AND EXPENSES:
Direct operating costs 7,109,155 7,041,603
Selling and administrative expenses 6,126,816 4,594,104
Marketing and advertising 2,060,011 292,899
Gain on real property lease buy-out - (300,000)
Gain on sale of marketable securities (539,871) -
Interest expense - net 44,448 102,326
----------- -----------
Total 14,800,559 11,730,932
----------- -----------
LOSS BEFORE EQUITY IN NET INCOME
OF AFFILIATE (1,910,228) (75,380)
EQUITY IN NET INCOME OF AFFILIATE 32,000 40,000
----------- -----------
NET LOSS $(1,878,228) $ (35,380)
=========== ===========
BASIC AND DILUTED NET LOSS PER SHARE $ (.030) $ (.001)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 63,377,000 59,440,000
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY AND COMPREHENSIVE LOSS
THREE MONTHS ENDED MARCH 31, 2000
(unaudited)
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ACCUMULATED
ADDITIONAL OTHER COMPRE-
COMMON PAID-IN COMPREHENSIVE HENSIVE
STOCK CAPITAL INCOME DEFICIT LOSS
BALANCE,
JANUARY 1,
2000 $630,701 $24,944,796 $2,205,144 $(12,783,831)
Net loss (1,878,228) $(1,878,228)
Stock options
and warrants
exercised 4,594 1,060,816
Purchase and
retirement of
treasury stock (14)
Tax effect of
stock options
exercised 472,105
Unrealized gain
on marketable
securities -
net of taxes 708,156 708,156
--------
Comprehensive
loss $(1,170,072)
-------- ----------- ---------- ------------ ===========
BALANCE
MARCH 31,
2000 $635,295 $26,477,703 $2,913,300 $(14,662,059)
======== =========== ========== ============
</TABLE>
See notes to condensed consolidated financial statements
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(unaudited)
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2000 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,878,228) $ (35,380)
Adjustments to reconcile net loss to
net cash (used in) provided
by operating activities:
Depreciation and amortization 795,165 962,649
Equity in net income of affiliate (32,000) (40,000)
Gain on sale of marketable securities (539,871) -
Other - (5,246)
Changes in operating assets
and liabilities:
Accounts receivable (9,502) 45,764
Other assets (770,592) (205,021)
Accounts payable and
accrued expenses 10,660 563,415
Other liabilities (29,486) 34,076
----------- ----------
Net cash (used in) provided
by operating activities (2,453,854) 1,320,257
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (175,665) (193,304)
Proceeds from sale of marketable securities 530,505 -
Repayment of related party loans - 10,107
Loans from others 12,237 17,196
----------- ----------
Net cash provided by
(used in) investing activities 367,077 (166,001)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments under capital lease obligations (381,107) (468,750)
Net payments on note payable - bank (222,517) (2,051,744)
Net borrowings on notes payable - other 17,889 13,877
Purchase of treasury stock (14) (11,044)
Proceeds from exercise of stock options 1,187,510 1,290,305
Net disbursements receipts on loans from
employee savings program (11,468) 33,720
----------- ----------
Net cash provided by
(used in) financing activities 590,293 (1,193,636)
----------- ----------
EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH 1,092 1,469
----------- ----------
NET DECREASE IN CASH (1,495,392) (37,911)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 5,665,833 883,580
----------- -----------
CASH AND EQUIVALENTS, END OF PERIOD $ 4,170,441 $ 845,669
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 79,684 $ 91,829
Income taxes 8,395 1,796
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Equipment acquisitions financed by
capital leases $ - $ 232,173
</TABLE>
See notes to condensed consolidated financial statements
TRACK DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(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, 2000, and the results of operations and of cash flows for the three
months ended March 31, 2000 and 1999. The results of operations for the three
months ended March 31, 2000 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, 1999 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, 1999 financial statements.
2. During the three months ended March 31, 2000, options to purchase 459,434
shares were exercised at prices of $0.75 to $5.00, aggregating net proceeds to
the Company of $1,065,410.
3. The Company charges all costs incurred to establish the technological
feasibility of a product or product enhancement to research and development
expense. Research and development expenses were $95,000 and $92,000 for the
three months ended March 31, 2000 and 1999, respectively.
4. Advertising costs, charged to operations when incurred, were
approximately $2,060,000 and $293,000 for the three months ended March 31, 2000
and 1999, respectively.
5. Segment Information
The Company operates in one business segment providing real-time financial
market data, fundamental research, news, charting, and analytical services to
institutional and individual investors through dedicated telecommunication lines
and the Internet.
The Company's revenues are derived from the following sources:
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2000 1999
Institutional and corporate $ 7,224,994 $ 7,322,150
Individual 5,665,337 4,333,402
----------- -----------
$12,890,331 $11,655,552
=========== ===========
</TABLE>
6. The Company owns 762,210 shares of Edgar Online, Inc. ("EOL"), an
Internet-based supplier of business, financial and competitive intelligence
derived from U.S. Securities and Exchange Commission data. EOL completed a
public offering of its common stock in May 1999. During the three months ended
March 31, 2000, the Company sold 48,362 shares of EOL, realizing a gain of
$534,633. The Company carries 498,000 shares of its investment (the portion
eligible for sale within a year) at $4,855,500, the market value at March 31,
2000, and the remaining 264,210 shares are carried at cost of $10,000. The
difference between the cost and fair market value of these securities, net of
deferred taxes, is classified as accumulated other comprehensive income as a
component of stockholders' equity.
7. The Company has a software development agreement with Third Millennium
Technology, Inc. ("TMT"), a corporation controlled by a director of the Company.
Fees paid to TMT consist of a declining scale fee per user of the Company's
myTrack service and certain additional fees are payable in connection with
revenues from online trading. Such fees amounted to $32,000 and $16,000 for the
three months ended March 31, 2000 and 1999.
The Company offers online trading through its myTrack service utilizing Track
Securities Corporation ("TSC") as its broker-dealer. TSC is a broker-dealer
owned and operated by a director of the Company. The Company is licensing its
myTrack trading system to a subsidiary of TSC. The Company is receiving $2.25
per trade pursuant to the agreement, which aggregated $1,084,000 in 2000. In
addition, TSC pays a share of the marketing and advertising costs incurred by
the Company, which aggregated $815,000 in 2000. At March 31, 2000, the amount
due from TSC of $441,000 is included in other assets and was paid in April,
2000. Further, he has a five-year consulting agreement with the Company pursuant
to which he is to be paid an annual fee of the greater of $50,000 or 5% of the
after-tax earnings, if any, from trading activities. In 2000, the fee was
$12,500. The Company expects to obtain its own broker-dealer license and, upon
obtaining such license, will terminate the relationship with TSC and transition
the trading accounts from TSC to the Company's broker-dealer.
8. In April 2000, the Company agreed to acquire approximately 5% of
iAnalyst, Inc. and Silicon Summit Technologies Inc, both privately held
companies, in exchange for an aggregate of 326,280 shares of the Company's
common stock. The closing, expected to occur in May, are subject to customary
terms and conditions.
TRACK DATA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Revenues for the three months ended March 31, 2000 and 1999 were
$12,890,331 and $11,655,552, respectively, an increase of 11%. The revenue
increase in 2000 is due to myTrack's online trading and market data services.
Until the Company obtains its own broker-dealer license, trading revenues
include only revenues from the licensing of its trading system, rather than a
full amount of commissions paid by customers. If full commissions were
recognized, total revenues for 2000 would have been $17,637,331, $4,747,000
greater than reported revenues, and costs and expenses would have increased by a
similar amount. The Company anticipates obtaining its own license by July 2000.
Direct operating costs were $7,109,155 for the first three months of 2000
and $7,041,603 for the similar period in 1999. Direct operating costs as a
percentage of revenues was 55% in 2000 and 60% in 1999. 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 $6,126,816 and $4,594,104 in the
2000 and 1999 periods, respectively, an increase of 33%. Selling and
administrative expenses as a percentage of revenues was 48% in 2000 and 39% in
1999. The dollar and percentage increase in 2000 compared to 1999 was
principally due to increased payroll and related expenses for myTrack's online
trading and market data services. Online trading was first introduced in the
second quarter of 1999.
Marketing and advertising costs increased significantly in 2000 to
$2,060,011 from $292,899 in 1999. Marketing costs in 2000 are net of $815,000
received from Track Securities under a licensing agreement. These costs were
incurred in connection with the Company's myTrack online trading (introduced in
June 1999) and market data systems. The Company is currently spending
approximately $1 million per month on marketing and advertising and expects to
continue to spend significant amounts in the future.
In 1999, the Company relocated certain of its personnel to other office
space and realized a gain on the landlord buy-out of the lease of approximately
$300,000.
In 2000, the Company realized a gain of approximately $540,000 on the sale
of certain shares of Edgar Online, Inc.
Interest expense decreased to $44,448 in the 2000 period compared to
$102,326 in 1999 due to decreased borrowings.
As a result of the above mentioned factors, the Company realized a net loss
before equity in net income from an affiliate of $1,910,228 in the 2000 period
compared to a net loss of $75,380 in 1999.
The equity in net income from an affiliate was $32,000 and $40,000 in 2000
and 1999, respectively.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 2000, cash used in operating
activities was $2,453,854 due to the loss incurred in that period compared to
cash provided by operating activities of $1,320,257 in 1999. Cash flows from
investment activities was $367,077 for the three months ended March 31, 2000 and
cash flows used in investing activities was $166,001 for the three months ended
March 31, 1999. The increase was principally due to proceeds from the sale of
marketable securities. Cash provided by financing activities was $590,293 in
2000 compared to cash used in financing activities of $1,193,636 in 1999. The
increase in 2000 from 1999 is primarily due to lower payments on bank notes
payable.
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, however, the Company
has spent substantial amounts for advertising its myTrack Internet-based online
trading and market data system. The Company may seek additional financing for
such efforts or dispose of certain of its marketable securities and also expects
to reduce marketing and advertising expenditures for the near term. On May 11,
2000, the quoted market price of the Company's marketable securities was
approximately $2 million less than the value reported as of March 31, 2000.
There are no major capital expenditures anticipated beyond the normal
replacement of equipment and additional equipment to meet customer requirements
and additional office space for myTrack customer service.
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.
Disclosures in this Form 10-Q contain certain forward-looking statements,
including without limitation, statements concerning the Company's operations,
economic performance and financial condition. These forward-looking statements
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. The words "believe," "expect," "anticipate" and
other similar expressions generally identify forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of their dates. These forward-looking statements are based
largely on the Company's current expectations and are subject to a number of
risks and uncertainties, including without limitation, changes in external
market factors, changes in the Company's business or growth strategy or an
inability to execute its strategy due to changes in its industry or the economy
generally, the emergence of new or growing competitors, various other
competitive factors and other risks and uncertainties indicated from time to
time in the Company's filings with the Securities and Exchange Commission.
Actual results could differ materially from the results referred to in the
forward-looking statements. In light of these risks and uncertainties, there can
be no assurance that the results referred to in the forward-looking statements
contained in this Form 10-Q will in fact occur.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate change market risk with respect to
its credit facility with a financial institution which is priced based on the
prime rate of interest. At March 31, 2000, $2,312,539 was outstanding under the
credit facility. Changes in the prime interest rate during fiscal 2000 will have
a positive or negative effect on the Company's interest expense. Such exposure
will increase accordingly should the Company maintain higher levels of borrowing
during 2000.
The Company has investments in marketable securities consisting principally of
its investments in Innodata Corporation and Edgar Online, Inc., both publicly
traded companies listed on Nasdaq. The market value of such securities is
dependent on future market conditions for these companies over which the Company
has little or no control.
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.
27 Financial Data Schedule
(b) There were no reports on Form 8-K filed during the
first quarter of 2000.
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
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Date: 5/12/00 /s/
----------------------------------
Barry Hertz
Chairman of the Board
Chief Executive Officer
Date: 5/12/00 /s/
---------------------------------
Martin Kaye
V.P. Finance
Principal Financial Officer
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,170,441
<SECURITIES> 4,855,500
<RECEIVABLES> 1,550,719
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,169,961
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,821,659
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 635,295
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 24,821,659
<SALES> 0
<TOTAL-REVENUES> 12,890,331
<CGS> 7,109,155
<TOTAL-COSTS> 14,800,559
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,448
<INCOME-PRETAX> (1,878,228)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,878,228)
<EPS-BASIC> (.030)
<EPS-DILUTED> (.030)
</TABLE>
