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, 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) 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, 2000 there were
63,942,363 shares of common stock outstanding.
PART I. FINANCIAL INFORMATION
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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
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------------
See page 12
PART II. OTHER INFORMATION
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See page 13
Track Data Corporation and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
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<S> <C> <C>
JUNE 30, DECEMBER 31,
2000 1999
-------- -----------
Unaudited Derived from
audited
financial
statements
ASSETS
CASH $ 2,178,963 $ 5,665,833
ACCOUNTS RECEIVABLE - net 1,731,517 1,541,217
MARKETABLE SECURITIES 2,522,915 3,675,240
FIXED ASSETS - net 6,384,699 6,680,952
INVESTMENT IN AFFILIATE 1,427,285 1,342,285
EXCESS OF COST OVER NET
ASSETS ACQUIRED - net 2,540,611 2,747,523
NET DEFERRED INCOME TAX
ASSETS 450,000 450,000
OTHER ASSETS 3,542,129 2,953,411
--------- ---------
TOTAL $20,778,119 $25,056,461
=========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY LIABILITIES
Accounts payable and
accrued expenses $ 4,369,038 $ 4,352,959
Note payable - bank 2,690,219 2,535,056
Notes payable - other 798,282 762,083
Capital lease obligations 1,741,475 2,006,094
Other liabilities 350,196 403,459
----------- -----------
Total liabilities 9,949,210 10,059,651
----------- -----------
STOCKHOLDERS' EQUITY
Common stock - $.01 par
value; 300,000,000
shares authorized;
issued and outstanding
- 63,934,363 shares in
2000 and 63,070,056
shares in 1999 639,344 630,701
Additional paid-in
capital 26,087,020 24,944,796
Accumulated other
comprehensive income 1,507,749 2,205,144
Deficit (17,405,204) (12,783,831)
------------ --------------
Total stockholders' equity 10,828,909 14,996,810
------------ --------------
TOTAL $ 20,778,119 $ 25,056,461
============ =============
</TABLE>
See notes to condensed consolidated financial statements
Track Data Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
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<S> <C> <C>
2000 1999
-------- -------
REVENUES $25,923,244 $23,317,070
----------- -----------
OPERATING COSTS AND EXPENSES:
Direct operating costs 14,346,044 14,059,496
Selling and administrative expenses 12,275,543 9,107,940
Marketing and advertising 4,361,546 1,209,117
Gain on real property lease buyout - (350,000)
Gain on sale of marketable securities (482,843) -
Interest expense - net 129,327 187,969
----------- -----------
Total 30,629,617 24,214,522
----------- -----------
LOSS BEFORE EQUITY IN NET INCOME
OF AFFILIATE AND INCOME TAXES (4,706,373) (897,452)
EQUITY IN NET INCOME OF AFFILIATE 85,000 176,000
----------- -----------
LOSS BEFORE INCOME TAXES (4,621,373) (721,452)
INCOME TAXES - -
----------- -----------
NET LOSS $(4,621,373) $ (721,452)
=========== ===========
BASIC AND DILUTED NET LOSS PER SHARE $ (.073) $ (.012)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 63,522,000 59,900,000
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements
Track Data Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
------------ -----------
REVENUES $13,032,913 $11,661,518
------------ -----------
OPERATING COSTS AND EXPENSES:
Direct operating costs 7,236,889 7,017,893
Selling and administrative expenses 6,148,727 4,513,836
Marketing and advertising 2,301,535 916,218
Gain on real property lease buyout - (50,000)
Loss on sale of marketable securities 57,028 -
Interest expense - net 84,879 85,643
----------- -----------
Total 15,829,058 12,483,590
----------- -----------
LOSS BEFORE EQUITY IN NET INCOME
OF AFFILIATE AND INCOME TAXES (2,796,145) (822,072)
EQUITY IN NET INCOME OF AFFILIATE 53,000 136,000
----------- -----------
LOSS BEFORE INCOME TAXES (2,743,145) (686,072)
INCOME TAXES - -
----------- -----------
NET LOSS $(2,743,145) $ (686,072)
=========== ===========
BASIC AND DILUTED NET LOSS PER SHARE $ (.043) $ (.011)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 63,668,000 60,284,000
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements
Track Data Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY AND COMPREHENSIVE LOSS
SIX MONTHS ENDED JUNE 30, 2000
(Unaudited)
<TABLE>
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<S> <C> <C> <C> <C> <C>
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 (4,621,373) $(4,621,373)
Issuance of
common stock
in exchange
for investment
in private
companies 3,263 466,580
Stock options
and warrants
exercised 5,381 1,141,341
Purchase and
retirement of
treasury stock (1) (767)
Reversal of tax
effect on stock
options
exercised (464,930)
Unrealized loss
on marketable
securities
- net of taxes (697,395) (697,395)
-----------
Comprehensive
loss $(5,318,768)
===========
BALANCE, -------- ----------- ---------- ------------
JUNE 30, 2000 $639,344 $26,087,020 $1,507,749 $(17,405,204)
======== =========== ========== ============
</TABLE>
See notes to condensed consolidated financial statements
Track Data Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
------------ ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,621,373) $ (721,452)
Adjustments to reconcile net loss
to net cash (used in) provided
by operating activities:
Depreciation and amortization 1,639,731 1,924,514
Equity in net income of affiliate (85,000) (176,000)
Gain on sale of marketable securities (482,843) -
Other - 3,017
Changes in operating assets and
liabilities:
Accounts receivable (190,300) 63,275
Other assets (302,554) 210,775
Accounts payable and accrued
expenses 16,079 (452,699)
Other liabilities 129,438 6,108
---------- ----------
Net cash (used in) provided by
operating activities (3,896,822) 857,538
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (572,791) (254,882)
Net proceeds (purchase) of marketable
securities 486,137 (50,929)
Repayment of related party loans - 19,498
Repayment of (loans to) others 12,237 (15,850)
-------- ----------
Net cash used in investing activities (74,417) (302,163)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments under capital lease obligations (785,913) (899,296)
Net proceeds (payments) on note payable
- bank 155,163 (1,042,858)
Net proceeds from notes payable - other 36,199 30,562
Net (payments) proceeds on loans from
employee savings program (189,808) 60,928
Purchase of treasury stock (768) (22,069)
Proceeds from exercise of stock options 1,268,822 2,409,481
--------- ----------
Net cash provided by financing activities 483,695 536,748
--------- ----------
EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH 674 881
--------- ----------
NET (DECREASE) INCREASE IN CASH (3,486,870) 1,093,004
CASH, BEGINNING OF PERIOD 5,665,833 883,580
---------- ----------
CASH, END OF PERIOD $2,178,963 $1,976,584
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for:
Interest $ 206,897 $ 177,204
Income taxes 10,615 9,367
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Equipment acquisitions financed by
capital leases $ 519,215 $ 607,807
Investment in private companies
acquired through issuance
of common stock 469,843 500,000
</TABLE>
See notes to condensed consolidated financial statements
Track Data Corporation and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 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 June 30, 2000, and the results of operations and of cash flows for the six
months ended June 30, 2000 and 1999. The results of operations for the six
months ended June 30, 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 six months ended June 30, 2000, options to purchase 864,307
shares were exercised at prices of $0.75 to $5.00, aggregating net proceeds to
the Company of $1,146,722. In June 2000, the Company granted options to
purchase 914,700 shares of its common stock at $1.50 per share to its officers
and employees.
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 $178,600 and $183,155 for the
six months ended June 30, 2000 and 1999, respectively.
4. 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Institutional $ 7,356,836 $ 7,125,843 $14,581,830 $14,447,993
Individual 5,676,077 4,535,675 11,341,414 8,869,077
------------ ----------- ----------- -----------
$ 13,032,913 $11,661,518 $25,923,244 $23,317,070
============ =========== =========== ===========
</TABLE>
5. 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 six months ended
June 30, 2000, the Company sold 48,362 shares of EOL, realizing a gain of
$534,633. The Company carries this investment at $2,522,915, the market value
at June 30, 2000. 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.
6. 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 $89,157 and $43,298 for the
six months ended June 30, 2000 and 1999. In addition, the Company paid a
termination fee of $40,000 during the second quarter of 2000. Under the
termination agreement, monthly fees continue through June 2001.
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 $2,041,639 in 2000. In
addition, TSC pays a share of the marketing and advertising costs incurred by
the Company, which aggregated $409,024 in 2000. At June 30, 2000, the amount
due from TSC of $436,303 is included in other assets and was paid in July, 2000.
Further, the director 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. The fee was $25,000
for the six months ended June 30, 2000. The Company obtained its own
broker-dealer license and terminated the license agreement with TSC effective
July 1, 2000.
7. In May 2000, the Company acquired approximately 2% of iAnalyst, Inc.
("IA") and Silicon Summit Technologies Inc. ("SST"), both privately held
companies, in exchange for an aggregate of 326,280 shares of the Company's
common stock. The Company registered these shares. IA provides the individual
investor Internet-based access to independent equity research analysts. SST is
a leading provider of e-finance solutions and services for B4B electronic
securities trading. Further, in May 2000, the Company's preliminary agreements
to acquire 10% of MainStreetIPO.com and FlexTrader.com were terminated.
8. Comprehensive (loss) income is as follows:
<TABLE>
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Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------ ------ ------ ------
Net loss $(2,743,145) $ (686,072) $(4,621,373) $(721,452)
Unrealized (loss)
gain on marketable
securities-net of taxes (1,405,551) 2,215,680 (697,395) 2,215,680
----------- ---------- ----------- -----------
Comprehensive (loss) income $(4,148,696) $1,529,608 $(5,318,768) $1,494,228
=========== ========== =========== ==========
</TABLE>
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, news, fundamental
research, charting and analytical services to institutional and individual
investors through dedicated telecommunication lines and the Internet. The
Company offers online trading through its myTrack Internet-based personal
investment service. myTrack is an Internet-based software application that is
not restricted by the limitations of an HTML browser-based static system offered
by virtually all of its well-known competitors. myTrack delivers a continuous
dynamic stream of live market data and investors' real-time online trading
activity.
Results of Operations
Three Months ended June 30, 2000 and 1999
Revenues for the three months ended June 30, 2000 and 1999 were $13,032,913
and $11,661,518, respectively, an increase of 12%. The revenue increase in 2000
is due to myTrack's online trading and market data services. The Company
obtained its own broker-dealer license in the third quarter of 2000. Prior
thereto, 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
$17,293,913, $4,261,000 greater than reported revenues, and costs and expenses
would have increased by a similar amount.
Direct operating costs were $7,236,889 for the three months ended June 30,
2000 and $7,017,893 for the similar period in 1999. Direct operating costs as a
percentage of revenues were 56% 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 $6,148,727 and $4,513,836 in the
2000 and 1999 periods, respectively, an increase of 36%. Selling and
administrative expenses as a percentage of revenues was 47% 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
$2,301,535 from $916,218 in 1999. 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 $500,000 per month on
marketing and advertising.
As a result of the above mentioned factors, the Company realized a loss
before equity in net income from an affiliate of $2,796,145 in the 2000 period
compared to a loss of $822,072 in 1999.
The equity in net income from an affiliate was $53,000 and $136,000 in 2000
and 1999, respectively.
Six Months ended June 30, 2000 and 1999
Revenues for the six months ended June 30, 2000 and 1999 were $25,923,244
and $23,317,070, respectively, an increase of 11%. The revenue increase in 2000
is due to myTrack's online trading and market data services. The Company
obtained its own broker-dealer license in the third quarter of 2000. Prior
thereto, trading revenues included 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
$34,931,244, $9,008,000 greater than reported revenues, and costs and expenses
would have increased by a similar amount.
Direct operating costs were $14,346,044 for the first six months of 2000
and $14,059,496 for the similar period in 1999. Direct operating costs as a
percentage of revenues were 55% in 2000 and 60% in 1999.
Selling and administrative expenses were $12,275,543 and $9,107,940 in the
2000 and 1999 periods, respectively, an increase of 35%. Selling and
administrative expenses as a percentage of revenues was 47% 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
$4,361,546 from $1,209,117 in 1999. These costs were incurred in connection
with the Company's myTrack online trading (introduced in June 1999) and market
data systems.
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
$350,000.
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 $129,327 in the 2000 period compared to
$187,969 in 1999 due to decreased borrowings.
As a result of the above mentioned factors, the Company realized a loss
before equity in net income from an affiliate of $4,706,373 in the 2000 period
compared to a loss of $897,452 in 1999.
The equity in net income from an affiliate was $85,000 and $176,000 in 2000
and 1999, respectively.
Liquidity and Capital Resources
During the six months ended June 30, 2000 cash used by operating activities
was $3,896,822 compared to cash provided by operating activities of $857,538 in
the six months ended June 30, 1999. The decrease in 2000 was primarily due to
the loss from operations in that period. Cash flows used in investing
activities was $74,417 and $302,163 for the six months ended June 30, 2000 and
1999, respectively. Cash flows from investing activities in 2000 included
proceeds from the sale of marketable securities of $486,000. Cash flows from
financing activities in the six months ended June 30, 2000 and 1999 was $483,695
and $536,748, respectively.
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
plans to spend substantial amounts for advertising its myTrack Internet-based
online trading and market data system. The Company recently reduced its
advertising costs and plans to seek additional financing and or dispose of
certain of its marketable securities to support its advertising costs in the
future. There are no major capital expenditures anticipated beyond the normal
replacement of equipment and additional equipment to meet customer requirements.
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 June 30, 2000, $2,690,000 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 and Use of Proceeds. 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. The Company filed no reports on Form 8-K
-------------------
during the quarter ended June 30, 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
<TABLE>
<CAPTION>
<S> <C> <C>
Date: 8/11/00 /s/
--------------------------
Barry Hertz
Chairman of the Board
Chief Executive Officer
Date: 8/11/00 /s/
--------------------------
Martin Kaye
Executive Vice President,
Principal Financial Officer
</TABLE>
