UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Year Ended
February 28, 1997 Commission File Number: 291525-NY
MARKET GUIDE INC.
New York 11-2646081
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2001 Marcus Avenue, Suite South 200, Lake Success, New York 11042-1011
(Address of Principal Executive Offices)
(516) 327-2400
(Registrant's Telephone Number, Including Area Code)
None
(Securities Registered Pursuant to Section 12(b) of the Act)
Common Shares - $.001 Par Value
(Securities Registered Pursuant to Section 12(g) of the Act)
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 preceding 12 months (or for 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 _______
As of May 16, 1997, the aggregate market value of the voting stock held by non-
affiliates, 2,798,744 shares of Common Stock, $.001 par value, was $6,297,174
based on the bid price of $2.25 for one share of Common Stock on such date.
The number of shares outstanding of the issuer's Common Stock, as of May 16,
1997 was 4,708,186.
REPORT OF INDEPENDENT AUDITORS'
To the Board of Directors and Stockholders of
Market Guide Inc.
2001 Marcus Avenue, Suite S200
Lake Success, NY 11042-1011
We have audited the accompanying Balance Sheets of Market Guide Inc. as of
February 28, 1997 and February 29, 1996 and the related Statements of Operation
and Accumulated Deficit, Cash Flows and Stockholders' Equity for the years
February 28, 1997, February 29, 1996 and February 28, 1995 then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Market Guide Inc. as of
February 28, 1997 and February 29, 1996 and the results of its operations and
its cash flows for the years February 28, 1997, February 29, 1996 and February
28, 1995 then ended in conformity with generally accepted accounting principles.
The supplemental information on pages F-18 through F-22 is presented for
purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements, and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ Zerbo & McKiernan, P.C.
Fairfield, New Jersey
May 19, 1997
PART I
Item 1: Business
Business
Market Guide Inc. was incorporated in the State of New York on March 23, 1983 as
"The Unlisted Market Service Corporation." On September 3, 1986 the current
corporate name was adopted. In 1996, the Company formed a new division,
CreditRisk Monitor, to develop a service for the corporate credit manager.
The Company acquires, integrates, condenses and publishes accurate, timely, and
objective financial and other information on publicly traded corporations, and
markets this information to the financial, investment and credit communities, as
well as to independent investors, in a cost effective manner.
The Market Guide Database covers over 8,300 companies trading on the New York,
American, Nasdaq and Over-the-Counter Stock Exchanges, including foreign
companies trading in the U.S. as ADRs and ADSs. The content created by Market
Guide is derived from information filed by the subject company with the
Securities and Exchange Commission, issued in press releases or carried in other
media reports. Each company's information is updated at least four and often
more than eight times a year, as soon as the relevant information becomes
available. Pricing and trading volume information incorporated into the
database are updated daily, and short interest statistics are updated monthly.
Market Guide adds value, distinguishes itself from the competition, and serves
its clients through its:
Flexible database design which gives users important insights not available
in competitive databases, thereby enabling them to make better informed
investment decisions,
Inclusion of auxiliary information such as earnings estimates, price
performance, relative price performance, summary insider and institutional
ownership statistics, bond ratings, and short interest statistics giving
users a complete perspective on each company,
Calculation of over 500 popular financial ratios, growth rates, and
averages computed for the user's convenience, and
Carefully planned, market tested display formats, including company to
industry comparisons, that allow users to quickly and efficiently make
carefully considered investment and credit decisions.
Developing efficient, timely, cost-effective and easy to use delivery
systems such as Market Guide for Windows, our Internet site
(www.marketguide.com) and the CreditRisk Monitor site
(www.creditriskmonitor.com).
The targeted markets for Market Guide's data and related products include
investment managers, investment research departments, financial planners,
investment counselors, investment bankers, banks, stockbrokers and brokerage
firms, traders, libraries, publications, corporations, law firms and individual
investors. The Company sells its information through four channels:
information vendors, the Internet, Market Guide for Windows (its proprietary
analytic software) and a print publication. The CreditRisk Monitor division
serves the need of the corporate credit managers through an Internet based
service.
Vendors
Market Guide works in partnership with financial information service vendors.
The financial information service vendors combine data from various real-time
and historical information sources with their own analytic software and data
delivery capability. Their sales forces sell the product and they also provide
customer training and support services. Market Guide focuses on developing the
highest quality information content and leveraging off the information vendor's
sales force, software, information dissemination infrastructure and customer
base. The amount of data presented, its display format, and the software's
analytic capabilities vary depending upon the way each information provider
defines its customers' needs, software capabilities, distribution technologies
and preferred pricing strategies.
The information service vendors that currently distribute the Market Guide
Database include: Accutrade; American Association of Individual Investors; Argus
Research; Aufhauser; Automatic Data Processing; AIQ Systems, Inc.; Bridge
Information Systems Inc.; CDA Technology; Ceres Securities; Charles Schwab and
Company; Data Broadcasting Corporation; Dow Jones Telerate; First Call
Corporation; Global Market Information; Holt Value Associates; IBM Infomarket;
ILX Systems Inc.; Instinet Analytics; Interactive Data Corporation; OneSource
Information Services, Inc.; Pacific Brokerage Services; P.C. Quote, Inc.;
Prodigy Services Company; Quotron Systems, Inc.; Real Time Quotes, Inc.;
Securities Data Corporation; Shark Information Services, Inc.; Telemet America,
Inc.; Telescan, Inc.; Track Data Corporation; Vickers Stock Research
Corporation; and Windows on Wall Street.
Business Developments
In July 1992, Market Guide entered into a database distribution agreement with
OneSource Information Services, Inc. OneSource distributes a "Reference"
Product Line and an "Investment" Product Line using Market Guide data.
OneSource Information Services, Inc. has multiple CD-ROM and Internet based
product lines that have different software capabilities and serve different
marketplaces. The Market Guide Database is the only database that we are aware
of that is available on four OneSource product lines -- CD/Corporate, CD/Notes,
CD/Investment and OneSource.com.
During the 1993 and 1994 fiscal years AIQ Systems, Inc., Dial Data, Dow Jones
Telerate, First Call Corporation, Instinet Analytics, and Interactive Data
Corporation began distributing Market Guide information.
On December 28, 1993, it was announced that Prodigy Services Company had reached
an agreement with the Company to incorporate selected items from the Market
Guide Database for use in Prodigy's Strategic Investor product. In January
1995, Prodigy introduced a completely revised and greatly enhanced Company
Reports and a new "Stock Hunter" search capability that features eight
predesigned screens utilizing recognized investment theories such as CANSLIM,
One up on Wall Street, Graham and Dodd, Wallflowers and others. There is also a
"Personal Search" feature which enables users to conduct a self-designed screen
search of Market Guide data using six pre-selected criteria. All these Prodigy
products are created from Market Guide information and earnings estimates from
Zack's Investment Research. The Zacks information is first sent to Market
Guide, integrated with our own information and sent to Prodigy as an integrated
data feed. Company Reports, Stock Hunter and Personal Search may be accessed by
any Prodigy subscriber for a modest per access fee, or are available to
Strategic Investor users as part of their monthly subscription. In May 1997,
this agreement was expanded to cover the new Prodigy Internet service.
In August 1995, the Company announced an agreement with the American Association
of Individual Investors (AAII) whereby AAII will incorporate Market Guide's
information in their existing screening software known as Stock Investor. AAII
is an educational not for profit corporation with over 100,000 members, a small
percentage of whom subscribe to Stock Investor. Market Guide's information
first appeared with Stock Investor's regular quarterly update in November 1995.
Market Guide has developed an analytic software package, Market Guide for
Windows, introduced in fiscal year 1996, that allows users to search the
database, develop user defined reports and download information to popular
spreadsheet software packages. The software is not patented or trademarked, but
a copyright is claimed by the Company. Market Guide for Windows is delivered
on a CD/ROM with weekly or monthly updates.
In June 1996, the Company announced a multi-year contract with Reuters Limited
which grants Reuters' worldwide use of Market Guide's financial database. To
date, this agreement represents the largest single contract in Market Guide's
history
The Company has an Internet site that has been in operation since the second
quarter of fiscal 1997. It is anticipated that this site will broaden the
Company's ability to sell and service its products directly to end users. The
address to our site is http://www.marketguide.com. The Company also uses its
Internet infrastructure to host co-branded sites and partnership with various
vendors.
The same Market Guide for Windows software with a smaller information set is
sold over the Internet to individual investors under the name StockQuest.
StockQuest was introduced in August 1996.
In August 1996, the Company formed a new division, CreditRisk Monitor (CRM).
CRM is an Internet-based financial information and real-time news service
targeted towards the credit industry. After seven months of development work,
the CreditRisk Monitor service was successfully introduced in April 1997.
Publications
A quarterly print product called The Market Guide - Select Over the Counter
Stock Edition is a single volume of 800 one-page reports on fast growing,
profitable over-the-counter companies. The book also has a detailed company
index listing 15 key statistics on each company in a tabular format. This index
is very useful to investors searching for attractive investment opportunities.
Market Guide attempts to provide continuity of coverage so that subscribers to
the book can keep following companies in which they have an interest. However,
from time-to-time the companies covered do change. The most common reasons for
deletion of coverage are:
The company has been acquired in a merger or a leveraged buyout,
The company has not filed a financial statement with the Securities
and Exchange Commission for two or more reporting periods,
The company has exhibited significant deterioration in its financial
condition,
The company has been deleted from the National Association of Security
Dealers Automatic Quotation System (Nasdaq) and has fewer than three
Market Makers,
The company now trades on the New York or American Stock Exchange, and
no longer qualifies for the OTC edition.
Companies dropped from the book are replaced by companies which are selected by
using proprietary Market Guide selection criteria. The companies in the book
have regularly outperformed the Nasdaq composite.
Database Enhancements
The Company continuously expands, enhances and improves the Market Guide
Database based on customer suggestions and employee feedback. In 1988, the
Company added the New York and American Stock Exchange companies to its then
current universe of Nasdaq and "pink sheet" companies.
In 1990, Market Guide decided to expand the database to include complete
detailed quarterly financial statements. The Company engaged in a series of
dialogues with current or potential vendors and customers to determine the
market potential, to identify the Company's perceived strengths and weaknesses,
and to research market needs and the appropriateness of the Company's
methodologies and objectives. The results of this analysis were the commitment
of resources to more than double the amount of information collected and
maintained on each subject company. In fiscal years 1990, 1991 and 1992 the
Company added the Annual Statement of Cash Flows and complete Quarterly Income
Statements, Balance Sheets and Statements of Cash Flows on all the companies in
the database. This has allowed Market Guide to serve new markets and to bid on
services for which Market Guide did not previously qualify.
In late 1993 the Company began to track short interest information published
monthly by the exchanges.
In early 1994 the Company began subscribing to and processing the Securities and
Exchange Commission's (SEC's) Electronic Data Gathering Analysis and Reporting
(EDGAR) service. This has given our analysts access to source documents (10-Ks,
10-Qs, etc.) ten days to two weeks earlier than in previous years. This has
resulted in record levels of timeliness measures for the Market Guide Database.
In the fall of 1994, Market Guide introduced completely new industry and sector
classifications that reflect the current economy and are being incorporated into
all of Market Guide's products.
These industry and sector classifications will help investors:
Identify which industry and sectors are outperforming the market or
have fallen from favor,
Compare companies to a well defined peer group,
Permit investors to construct and analyze industry aggregate financial
characteristics,
Properly construct portfolios to ensure adequate diversification, and
Make well reasoned asset allocation decisions.
In the fall of 1995, the Company completed development of a historical pricing
database to complement the financial information it has compiled. The pricing
database contains both historical and current information for all issues trading
on the New York and American Stock Exchanges, the Nasdaq Stock Market, and
selected OTC Bulletin Board Companies. The Market Guide pricing database
contains Open, High, Low, Close and Volume information on a daily basis
beginning in 1983, with daily updates occurring each trading day.
In order to satisfy institutional investors' needs for extensive historical
financial information, Market Guide increased the number of years of historical
annual financial statements in the Market Guide database. With the culmination
of the Big Ten project, Market Guide now has annual financial statement going
back to 1983 for most companies on its database. As a result of the Big Ten
project, Market Guide is now able to compete for other business where at least
ten years of historical data is required. The information is currently being
distributed within the OneSource US Equities product, the Market Guide for
Windows product, and through selected vendors.
In fiscal year 1997, the Company began collecting information on Dividend
Reinvestment Plans (DRIPs). The DRIP information Market Guide collects
includes restrictions, fees, discounts and contacts on over 900 plans. The
Company will continue to expand its DRIP database as more companies realize the
benefits of sponsoring such plans.
In fiscal year 1997, the Company incorporated Senior Debt Ratings into its
database. The ratings offered on the Market Guide Database are provided by Fitch
Investors Service, L.P., Moody's Investors Service and Standard & Poor's Rating
Group, and include current ratings, prior ratings and the accompanying dates.
Using these ratings, Market Guide has calculated an average company and industry
rating.
Internet
The Company has created a dynamic, comprehensive and extremely useful Internet
site. The site contains both advertising supported and added cost content.
Advertising supported content is free to the user and Market Guide expects to
cover its costs and generate profits from the sale of advertising. As of May
1997, the advertising supported content included:
Price quotes (in partnership with PC Quote),
News (in partnership with News Alert),
Market Guide's Company Snapshot Reports,
Market Guide's What's Hot/What's Not service that identifies the price
performing leaders and laggards by sector, industry and company over various
time periods, and
Price charts.
For users who wish to have more comprehensive information, added cost content is
available for nominal per report or subscription based fees. The added cost
content includes:
The Market Guide Quick Facts Report,
The Market Guide Company Profile Report,
The Market Guide Ratio Comparison Report,
The Market Guide Detailed Financials,
The Market Guide ProVestor Report,
The Earnings Estimate Report (in partnership with First Call), and
The Market Guide StockQuest Screening and Reporting application.
The Market Guide web site is very comprehensive with easy navigational
capabilities. It has been designed to handle all the needs of most investors.
However, we continue to enhance the site with additional content, capabilities
and educational aids. Future enhancements will include online trading
capabilities and the sale of investment materials.
In addition to our own site, Market Guide's information is available on over 20
other web sites. Most of these web partners also offer their users added cost
services from Market Guide. These added cost services are delivered mostly
through co-branded sites hosted by Market Guide.
CreditRisk Monitor
Market Guide's newest division, CreditRisk Monitor (CRM), is a new online
information and news service that follows more than 375 U.S. publicly held
domestic retail chains and wholesalers. This online service is accessible
through the Internet (www.creditriskmonitor.com) and has been designed to
provide corporate credit managers with the analytical tools necessary to follow,
on a daily basis, all the public companies they do business with.
CRM was formed specifically to leverage Market Guide's comprehensive database
and state-of-the-art technology through sales to a new market. CRM provides the
credit community with a cost efficient, online credit and financial information
service.
The CRM information service consists of: CRM Company Reports, the CRM Alert
Notification Service and the CRM Real-Time News Service. The CRM web site was
up and running as of April 1997.
Business Facilities
In October 1994, the Company relocated to new headquarters in Lake Success, New
York. Lake Success is on the Queens (New York City) - Nassau County (Long
Island) border. The Company currently maintains two office suites in this
complex, Suite South 200 which totals 13,500 square feet, and Suite West 290
which totals 5,500 square feet.
In June 1996, the Company leased a sales office in Chicago, Illinois. This
space totals 572 square feet and is staffed by a full time sales representative.
Reverse Stock Split
The Company instituted a one-for-four reverse stock split on October 16, 1995.
Corporate Incentives
At the August 30, 1995 shareholders' meeting, shareholders approved an Employee
Stock Purchase Plan, a Key Employee Incentive Plan and an Outside Directors'
Incentive Plan. The Employee Stock Purchase Plan was put into effect on
September 1, 1995. The incentive plans are currently being put into effect.
Competition
The investment and financial information industry is highly competitive with
many different firms serving the industry's needs. There are numerous print and
electronic publishers of information for the investment community, most of whom
have been in business longer, are better known and whose financial resources
exceed those of this Company. Among the better known competitors are: Standard
& Poor's, Moody's, Value Line and Disclosure.
The Company believes that it is distinguished from some of the competition as it
publishes one of the largest databases of investment quality information.
Market Guide also competes by providing a database structure that preserves
distinctions that help users make better informed decisions and through the
effective use of technology that enables the Company to be a price leader.
One of the most significant distinctions is that Market Guide stores and
displays company financials in the same "company specific line item description"
format used by the subject company in its SEC filings. "Company specific line
item description" means that the line item terminology assigned to Income
Statement, Balance Sheet or Statement of Cash Flow values is the same as that
used by the company in its official report. For example, "Aircraft Fuel" and
"Landing Fees" may be shown for an airline company; "Newsprint" and "Postage"
for a newspaper publisher. This allows users to project the impact of external
events such as changes in the price of oil, paper or postage on the
profitability of a company. Competitive databases might consolidate these items
under general headings such as "Costs of Goods Sold."
The principal methods of competition between the companies engaged in the
historical financial information business are: timeliness of database updating;
accuracy of data; size of the universe presented; depth of coverage of each
company in the universe; number of years of coverage; methods of delivery to the
end user; the inclusion of analysis or opinion; customer/vendor support and
price.
Personnel
The Company currently has a staff of 87 full-time employees, up from 58 at the
end of fiscal 1996. The increased hiring contributed to the growth in the sales
and marketing, MIS, and research departments, as well as the start up of
CreditRisk Monitor.
Item 2: Properties
In October 1994, the Company moved its entire data collection operation and
management offices to 2001 Marcus Avenue, Suite South 200, Lake Success, New
York 11042-1011. The new space is approximately 13,500 square feet.
In November 1996, the Company leased an additional 5,500 square feet in the same
office complex. This space is being used primarily for Market Guide's new
division, CreditRisk Monitor, and the programming department.
In management's opinion the layout, design, construction and furnishing of the
facility will support the growth of the Company. The telephone, data network,
lighting and electrical support systems designed into the facility create a
pleasant, professional and comfortable environment in which our employees can
efficiently perform their tasks effectively.
The productive capacity of the facility allows for the expansion of the
Company's data collection capacities in a more rapid and efficient manner, as
well as to increase the number of companies in the database and the amount of
information collected on each subject company.
The facility has allowed the Company to acquire the services of several
additional sales and marketing personnel with space designated and furnishings
in place for additional persons in the fields of marketing, sales and customer
support.
The facility contains specifically constructed spaces for the Company's
extensive computer and programming activities. Space exists for the expansion
and support of current and anticipated on-line services, vendor delivery, and
Internet services.
The facilities created to support the Company's analyst staff has allowed for a
doubling in staff dedicated to the updating and maintenance of the Market Guide
Database. Network redundancy and doubled capacity for computer terminal
placements have been designed and built in to this vital activity area.
In June 1996, the Company leased 572 square feet in Chicago, Illinois. The
space is being used as a sales office from which one dedicated sales
professional is managing selected existing vendors and generating new business.
Item 3: Legal Proceedings
In December 1996, the Company commenced litigation in the United States District
Court for the Eastern District of New York against Information Clearinghouse,
Inc. d/b/a F&D Reports (ICI) and Lawrence Sarf. The Company's complaint alleges
claims of trademark infringement, unfair competition, deceptive trade practices
and conversion in connection with the defendant's theft and use of the Company's
proprietary slogan, "On-Line, On-Time, On-Target," developed for use with its
Internet based credit reporting service, CreditRisk Monitor. The Company seeks
injunctive relief, an accounting, monetary and punitive damages.
Contemporaneously, an action was commenced in the Nassau County Supreme Court by
ICI against the Company, its officers, and primarily, three newly engaged
employees of Market Guide. ICI claims misappropriation of proprietary
information and trade secrets by the newly engaged employees, unfair
competition, breach of fiduciary duty and tortious interference. While ICI
requests injunctive relief as well as monetary damages, no request for temporary
relief has been sought. Discovery has not commenced in either action.
Management does not believe that the pending actions will have a material effect
on the business activities of the Company. Management intends to vigorously
prosecute its complaint against ICI and is determined to defend itself, its
officers and employees against all claims made by ICI.
Item 4: Submission of Matters for a Vote of Security Holders
None.
Item 5: Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock was previously traded on the OTC Bulletin Board under
the symbol MARG for the 1996 and 1997 fiscal years. Effective March 5, 1997,
the Company's stock commenced trading on the Nasdaq SmallCap Market under the
symbol MARG. The table below sets forth, for the fiscal periods shown, the high
and low closing prices for the Common Stock as reported by a brokerage firm
active in the shares of the Company's Common Stock (as adjusted for the one-for-
four reverse stock split in October 1995). On May 16, 1997, the last reported
sale price of the Common Stock as reported on the OTC Bulletin Board was $2.50
per share.
Fiscal 1996 High Low
First Quarter 4 1/4 2 19/32
Second Quarter 4 2 19/32
Third Quarter 5 3/4 3
Fourth Quarter 5 7/8 4
Fiscal 1997 High Low
First Quarter 5 3/32 3 1/4
Second Quarter 5 1/4 3 1/4
Third Quarter 4 1/8 2 3/4
Fourth Quarter 4 3/4 2 7/8
On May 16, 1997 there were 410 holders of record of the Common Stock of the
Company. The Company estimates the number of beneficial owners of the
Company's Common Stock on May 16, 1997 to be 800.
The Company has never paid a cash dividend on its Common Stock. The Board of
Directors currently intends to retain all earnings to finance the expansion of
the Company's business and does not anticipate paying cash dividends in the
foreseeable future.
Item 6: Selected Financial Data
The following is selected financial data only, and is qualified by the Financial
Statements, in their entirety, which are set forth elsewhere in this Form 10-K.
Summary Operating Data
Fiscal Year Ended Feb 28, 1997 Feb 29, 1996 Feb 28, 1995 Feb 28, 1994 Feb 28, 1993
Total Revenues (1) $ 4,776,418 $ 3,999,759 $ 2,687,950 $ 2,001,118 $ 1,614,527
Net Income 258,329 507,179 338,438 248,202 51,094
Earnings Per
Share (2) .06 .12 .08 .07 .01
Weighted Average
Number of Shares
Outstanding 4,250,124 4,165,457 4,052,950 3,505,141 3,505,141
Summary Balance Sheet Data
Fiscal Year Ended Feb 28, 1997 Feb 29,1996 Feb 28, 1995 Feb 28, 1994 Feb 28, 1993
(restated)
Working Capital (1) $ 1,447,754 $ 974,102 $ 766,951 $ (93,593) $ (324,863)
Total Assets 5,228,648 3,471,704 2,603,097 1,230,797 931,345
Long Term Debt and
Obligations Under
Capital Leases,
Less 564,262 291,202 182,737 14,092 2,283
Current
Maturities
Stockholders' 4,060,202 2,448,230 1,843,471 590,819 342,617
Equity
(1) Print product and Market Guide for Windows revenue are deferred at the time
of sale and recognized ratably over the terms of the subscriptions. Costs
connected with the procurement of subscriptions and memberships are expensed as
incurred.
(2) Earnings per share are computed based on the weighted average number of
shares of Common Stock outstanding in each fiscal year.
PART II
Item 7:Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis of the fiscal years ended February 28,
1997, February 29, 1996, and February 28, 1995 should be read in conjunction
with the Consolidated Financial Statements and Notes thereto.
Results of Operations
For the fiscal year ended February 28, 1997 compared to February 29, 1996
Total revenues for the fiscal year ended February 28, 1997 increased 19% to
$4,776,418 from $3,999,759 in fiscal year 1996. The increase in revenues
reflects a 13% increase in database vendor sales to $4,150,777 and Market Guide
product sales growth of 119% to $563,788. The revenue growth was attributable
to continued sales gains in our traditional core of vendors, new revenue from
the addition of more than a dozen new Internet related vendors, the introduction
of our own web site (www.marketguide.com), and incremental sales of Market Guide
for Windows products. Revenue growth was restrained by a permanent reduction in
revenue from an existing vendor beginning in the second quarter of fiscal 1997.
Print product revenues, consisting mainly of the Market Guide - Select OTC Stock
Edition, decreased 9% to $61,853 from $67,928 in fiscal year 1996. The decline
in sales continues to reflect lower sales to public libraries due to Market
Guide's decision to concentrate on marketing electronic products and services.
Total operating expenses for the fiscal year ended February 28, 1997 increased
30% to $4,475,976 from $3,455,120 in fiscal year 1996. Higher operating
expenses principally reflected increased costs associated with hiring additional
personnel in all departments to support faster anticipated growth, increased
general and administrative expenses, and several one-time expenses in the fourth
quarter. The non-recurring expenses included filing and accounting fees related
to the commencement of the Company's stock trading on the Nasdaq SmallCap market
in March 1997 and start-up and pre-release marketing expenditures related to the
Company's new division, CreditRisk Monitor.
Income from operations for the fiscal year ended February 28, 1997 decreased 45%
to $300,442 from $544,639 in fiscal year 1996. The decline in operating income
primarily resulted from a permanent reduction in revenue from an existing vendor
and higher operating expenses.
Interest income for the fiscal year ended February 28, 1997 increased 26% to
$31,128 from $24,641 in fiscal year 1996. The increase reflects increased
earnings on higher cash balances throughout the fiscal year.
Interest expense for the fiscal year ended February 28, 1997 increased 24% to
$75,592 from $60,974 in fiscal year 1996. Higher interest expenses included
additional capital lease service requirements in fiscal year 1997.
Income tax provision for the fiscal year ended February 28, 1997 totaled
($2,351) compared with income tax expense of $1,127 in fiscal year 1996.
Net income for the fiscal year ended February 28, 1997 declined 49% to $258,329
from $507,179 in fiscal year 1996. The decrease in net income was principally
due to the previously discussed increases in expenses and the permanent
reduction in revenue from an existing vendor relationship.
For the fiscal year ended February 29, 1996 compared to February 28, 1995
Total revenues for the fiscal year ended February 29, 1996 increased 49% to
$3,999,759 from $2,687,950 in fiscal year 1995. The increase in revenues is
primarily attributable to database vendor sales increasing 51% to $3,674,830.
Growth in database vendor sales resulted from an increase in the number of
vendors providing the Market Guide database as well as increased sales
penetration among several existing vendors. Market Guide product sales
increased 42% to $257,001 from $181,143 in fiscal year 1995. Principally due to
the successful introduction of Market Guide for Windows in October 1995. Print
product revenues, consisting mainly of the Market Guide - Select OTC Stock
Edition, declined 9% to $67,928 from $74,530 in fiscal year 1995. The decline
in print product revenues reflects lower sales to public libraries due to Market
Guide's decision to concentrate on marketing its electronic products.
Total operating expenses for the fiscal year ended February 29, 1996 increased
49% to $3,455,120 from $2,325,773 in fiscal year 1995. Contributing to higher
operating expenses were costs associated with the planned increase in the number
of employees. The Company added 15 employees from the end of fiscal year 1995
with emphasis on the sales and marketing functions. Additional expense
increases resulted from a full year of occupancy at Market Guide's new corporate
location. The new location is approximately three times the size of the
Company's prior facility, accounting for much of the balance of the increase in
general and administrative expenses.
Income from operations for the fiscal year ended February 29, 1996 increased 50%
to $544,639 from $362,177 in fiscal year 1995. This increase reflects growth in
revenues, as mentioned above, as well as management's continued effort to
control operating expense growth.
Net interest expense for the fiscal year ended February 29, 1996 increased
$29,440 to $36,333. The growth in interest expense reflects increased interest
costs associated with lease agreements used to purchase equipment and fixtures.
Income tax expense for the fiscal year ended February 29, 1996 decreased $15,719
to $1,127. The decline in income tax expense reflects changes in rules governing
alternative minimum tax in the state of New York.
Net income for the fiscal year ended February 29, 1996 increased 50% to $507,179
from $338,438 in fiscal year 1995. The increase reflects growth in revenues,
management's continued effort to control operating expense growth and a
reduction in income taxes.
Liquidity and Capital Resources
The Company's financial condition reflects the eighth consecutive year of steady
improvement. The improvement is primarily attributable to higher revenue in all
three markets -- The Individual, the Broker & Trader, and the Institutional
Investor marketplaces -- and equity financing.
As of February 28, 1997, the Company's working capital (current assets less
current liabilities) increased 49% to $1,447,754, up from $974,102 in fiscal
year 1996. The Company's cash and cash equivalents totaled $1,230,893 at the
end of fiscal year 1997 compared to $680,783 at the end of fiscal year 1996.
For the fiscal year ended February 28, 1997, net cash provided by operating
activities increased 40% to $827,920, from $593,475 in fiscal year 1996. The
increase reflects higher depreciation expenses and lower accounts receivable
balances.
For the fiscal year ended February 28, 1997, net cash used in investing
activities increased 114% to $1,913,169, from $891,963 in fiscal year 1996. The
increase in investing activities reflects the establishment of a new division,
CreditRisk Monitor, the Company's investment in database enhancements, the
continued development of Market Guide for Windows and StockQuest, and the
development of the Market Guide Internet site (www.marketguide.com).
For the fiscal year ended February 28, 1997, net cash provided by financing
activities increased to $1,635,359 in fiscal year 1997 compared to $284,136 in
fiscal year 1996. The majority of the increase in financing activities reflects
proceeds from the January 1997 private placement of $1,201,772 for 343,363
shares at $3.50 per share. The Company also repaid all of its outstanding debt
other than capitalized leases.
The Company did not engage in any borrowing other than capitalized leases during
the fiscal year. In March 1997, the Company finalized an agreement on a
$1,000,000 line of credit with Fleet Bank. The line of credit will be used for
funding equipment purchases and converts to a three year term loan after August
31, 1997.
The Company believes that its current liquidity is sufficient to meet its
obligations during the next twelve months.
Item 8: Financial Statements and Supplementary Data
This information required by Item 8, and an index thereto, appears at pages F-4
through F-22 (inclusive) of this Report, which pages follow page 22.
Item 9: Disagreements on Accounting Financial Disclosure
None.
PART III
Item 10: Directors and Executive Officers of the Registrant
(a) Identification of Directors
The names, ages and principal occupations of the Company's Directors as
of the end of the reporting period, and the data on which their term of
office commenced and expires, are as follows:
First
Term of Became Principal
Name Age Office Director Occupation
John D. Case 52 1 1984 Chairman of the Board of Directors,
General Counsel and Secretary of the Company
Homi M. Byramji 44 1 1988 President, Chief Executive Officer,
Treasurer and Director of the Company
Mark B. Burka 47 1 1995 Portfolio Manager, Manager of Pension
and Deferred Benefit Investments, Aon
Advisors, Inc. and Director of the Company
Raymond B. Dooley 50 1 1989 Banker, specializing in
structuring government backed
loans, and Director of the Company
(1) Directors are elected at the annual
meeting of stockholders and hold office until the
following annual meeting.
(2) Time, Inc. has the right to name a
Director to the Board as long as it retains at least a
3.5% ownership in the Company. Time, Inc. currently owns
3.3% of the shares outstanding and has not exercised its
right to name a Director since 1987.
(3) Changes since end of reported period:
None.
(b) Business Experience
John D. Case, age 52, is a graduate of Hofstra University (B.A.
1968) and Suffolk University Law School (J.D. 1971). He is admitted
to the practice of law in New York State and Federal jurisdictions.
Prior to assuming the Company's Presidency and Chairmanship in
February 1989, he was a Director of the Company (elected 1984) and was
engaged in the practice of law. Mr. Case served as President and CEO
of the Company from February 1989 to February 1992. Mr. Case is
currently compensated in the form of cash and qualifies for the Key
Employee Incentive Plan.
Homi M. Byramji, age 44, a Director since 1988, had previously
consulted in computerized equity research for nine years. He holds a
Masters Degree in Business Administration, Rutgers University (1975)
and became Secretary and Treasurer of the Company on February 23,
1989. Mr. Byramji remained Treasurer and assumed the duties of
President and CEO on March 1, 1992. He is compensated in the form of
cash and qualifies for the Key Employee Incentive Plan.
Mark B. Burka, age 47, joined the Board in August 1995. He is a
Chartered Financial Analyst and Manager of Pension and Deferred
Benefit Investments with Aon Advisors, Inc. Mr. Burka hold a Masters
Degree in Business Administration from the University of Chicago,
Graduate School of Business. He has been employed with Aon Advisors,
Inc. and its predecessors since 1977.
Raymond B. Dooley, age 50, joined the Board in March 1989. He is a
banker specializing in structuring government backed corporate loans.
Mr. Dooley holds a Masters Degree in Business Administration from St.
John's University.
All Directors of the Company will serve in such capacity until the next annual
meeting of Company's stockholders and until their successors have been duly
elected and qualified.
Item 11: Executive Compensation
Summary of Executive Compensation
The following table sets forth the total compensation paid or accrued by the
Company to executive officers of the Company who served in such capacities
during fiscal year 1997 (the "Named Officers") for services rendered during each
of the last three fiscal years.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation
Compens Awards
ation
Fiscal Securities
Name and Principal Position Year Salary Bonus Underlying
Options
Granted (#)
Homi M. Byramji................. 1997 $200,000 -0- -0- (a)
President, Chief Executive 1996 170,000 -0- -0- (a)
Officer and Treasurer 1995 142,000 -0- 12,500 (b)
John D. 1997 $125,000 -0- -0- (a)
Case....................... 1996 75,000 -0- -0- (a)
Chairman, General Counsel 1995 50,000 -0- 12,500 (b)
and Secretary
(a) For the fiscal years ended February 28, 1997 and February 29, 1996, Mr.
Case and Mr. Byramji are included in the Key Employee Incentive Plan
approved by the shareholders in August 1995. As of this date, the Plan has
not been implemented and no options have been awarded.
(b) Mr. Case and Mr. Byramji are partially compensated with options for the
purchase of Restricted Common Stock (per Rule 144 of the Securities and
Exchange Act of 1933 as amended) of the Company. The amount of options
issued in exchange for services is valued at the average bid price for the
month of February.
Employment Agreements
None of the Company's Executive Officers currently have employment contracts
with the Company.
Employee Stock Purchase Plan
At the August 31, 1995 annual shareholders' meeting, the Board of Directors
approved an Employee Stock Purchase Plan. The Plan enables employees to
purchase common stock of the Company through payroll deductions or cash payments
at a 15% discount based on the lower of the average closing price during the
quarter, or the average closing price for the last five days of the quarter.
Key Employee Incentive Plan
At the August 31, 1995 annual shareholders' meeting, the shareholders approved a
plan that creates the ability to grant stock and/or options to purchase stock of
the Company to key corporate employees.
Outside Directors' Plan
At the August 31, 1995 annual shareholders' meeting, the shareholders approved a
plan that creates the ability to grant non-qualified stock options to the
Company's outside directors.
Item 12: Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of February 28, 1997 by all persons
known to the Company to be beneficial owners of more than 5% of its Common Stock
and all Officers and Directors, both individually and as a Group. For purposes
of calculating the amount of beneficial ownership and the respective
percentages, the number of shares of Common Stock which may be acquired by a
person upon the exercise of outstanding warrants, options or upon conversion of
outstanding promissory notes, are considered outstanding, but shall not be
deemed to be outstanding for the purpose of computing the percentage of Common
Stock owned by any other person.
Name and Address of Amount and Nature of Approximate
Beneficial Owner Beneficial Ownership (1) Percent of
Class (2)
Mark B. Burka 441,000 9.4%
618 Washington Avenue
Wilmette, IL 60091
Homi M. Byramji (3) 643,281 13.6%
One Sheep Hill Road
Boonton Township, NJ 07005
John D. Case (3) 848,161 18.0%
12 Timberland Lane
Old Brookville, NY 11545
Raymond B. Dooley 2,000 -
98 Eighth Avenue
Sea Cliff, NY 11579
Irving B. Harris (4) 254,666 5.4%
2 North LaSalle Street
Chicago, IL 60602
Jerome Kahn, Jr. (4) 452,999 9.6%
2 North LaSalle Street
Chicago, IL 60602
Time Inc. 157,576 3.3%
1271 Avenue of the Americas
New York, NY 10020
All Directors and Officers 1,934,442 40.9%
as a Group (4 persons) (3)
(1) Unless otherwise indicated, all shares are directly owned and the
sole voting and investment power is held by the persons named.
(2) Based upon 4,708,186 shares of Common Stock issued and
outstanding as of February 28, 1997.
(3) Includes options for the purchase of 12,500 shares of restricted
Common Stock at $2.68 per share.
(4) Includes shared voting and dispositive power of 50,000 shares
owned by the Harris Foundation and 204,666 shares owned by the William
Harris & Company Profit Sharing Trust.
The Company does not know of any arrangements or pledge of its securities by
persons now considered in control of the Company that might result in a change
of control of the Company.
Item 13: Certain Relationships and Related Party Transactions
In February 1997, the Company repaid all the outstanding debt owed to its
Chairman, John D. Case. The total debt repaid was $95,333, excluding interest
paid.
Item 14: Financial Statements and Financial Statement Schedules, Exhibits and
Reports on Form 8-K and 8-A
(a) (1) (2) Financial Statements and Financial Statement Schedules
A list of the Financial Statements and Financial Statement Schedules
filed as a part of this Report is set forth in Item 8, and appears at Page
F-2 of this Report; which is incorporated herein by reference.
(a) (3) Exhibits
3 Certificate of Incorporation and Amendments thereto*
3(A) By-Laws*
(b) Reports on Form 8-K
In June 1996, Market Guide announced the signing of a multi-year contract to
provide Reuters Ltd. with the right to use and distribute the contents of the
Market Guide database. The Company deems the acquisition of this contract to be
of importance to its shareholders.
(c) Reports on Form 8-A
In January 1997, the Company announced completion of a private placement sale of
343,363 shares of restricted common stock at a price of $3.50 per share to a
limited number of institutional and qualified individual investors. Proceeds of
the offering totaled $1,201,771.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has caused this Report to be signed on its behalf by
the undersigned, as principal financial and accounting officer thereunto duly
authorized.
MARKET GUIDE INC.
Dated: May 29, 1997
Lake Success, New York /s/ Homi M. Byramji
President, CEO and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
Chairman of the Board
/s/ and Secretary May 28, 1997
JOHN D. CASE
President, CEO,
/s/ Treasurer and Director May 29, 1997
HOMI M. BYRAMJI
/s/ Director May 27, 1997
MARK B. BURKA
/s/ Director May 28, 1997
RAYMOND B. DOOLEY
MARKET GUIDE INC.
FINANCIAL STATEMENTS
AND
REPORT OF INDEPENDENT AUDITORS'
FOR THE YEARS ENDED FEBRUARY 28, 1997
FEBRUARY 29, 1996, AND
FEBRUARY 28, 1995
Table of Contents
Financial Statements
Report of Independent Auditors'
Balance Sheets for the Fiscal Years Ended February 28, 1997
and February 29, 1996 F-4-5
Statements of Operation and Accumulated Deficit for the Fiscal
Years
Ended February 28, 1997, February 29, 1996, and February 28,
1995 F-6
Statements of Cash Flows for the Fiscal Years Ended February
28, 1997,
February 29, 1996, and February 28, 1995 F-7
Statements of Stockholders' Equity for the Fiscal Years Ended
February 28, 1997, February 29, 1996, and February 28, 1995 F-8
Notes to Financial Statements February 28, 1997, February 29,
1996,
and February 28, 1995 F-9-17
Financial Statement Schedules
Schedule of Indebtedness of and to Related Parties for the
Fiscal Years
Ended February 28, 1997, February 29, 1996, and February 28,
1995 F-18
Schedule of Property, Plant and Equipment for the Fiscal
Years Ended
February 28, 1997, February 29, 1996, and February 28, 1995 F-19
Schedule of Accumulated Depreciation and Amortization of
Property,
Plant and Equipment for the Fiscal Years Ended February 28,
1997,
February 29, 1996, and February 28, 1995 F-20
Schedule of Computer Software and Product Enhancements for the
Fiscal Years Ended February 28, 1997, February 29, 1996,
and February 28, 1995 F-21
Accumulated Amortization of Computer Software and Product
Enhancements for the Fiscal Years Ended February 28, 1997,
February 29, 1996, and February 28, 1995 F-22
MARKET GUIDE INC.
Balance Sheets
February 28, 1997 February 29, 1996
(restated)
ASSETS
Current Assets:
Cash $1,230,893 $680,783
Accounts receivable (net of
allowance for doubtful accounts) 557,415 761,180
Prepaid expenses and other current 263,630 264,411
assets
Total current assets 2,051,938 1,706,374
Property, plant and equipment:
Furniture and equipment 936,097 639,944
Equipment held under capital leases 942,949 543,655
Leasehold improvements 72,509 0
1,951,555 1,183,599
Less Accumulated depreciation and
amortization
(including amortization of $189,234
and $154,233
in 1997 and 1996, respectively, on 744,551 515,975
capital leases)
Net propery, plant and equipment 1,207,004 667,624
Other assets:
Computer software and product
enhancements
(net of accumulated amortization) 1,891,621 1,034,480
Deposits and other assets 78,085 63,226
Total other assets 1,969,706 1,097,706
Total assets $5,228,648 $3,471,704
MARKET GUIDE INC.
Balance Sheets - continued
February 28, 1997 February 29, 1996
(restated)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and $176,012 $167,355
capital leases
Unearned revenues 248,679 163,371
Accounts payable and other accrued expenses 179,493 401,546
Total current liabilities 604,184 732,272
Non-current liabilities:
Long-term debt and capital lease obligations,
less
current maturities 564,262 291,202
Total non-current liabilities 564,262 291,202
Commitments 0 0
Total liabilities 1,168,446 1,023,474
Stockholders' equity:
Common stock - $.001 par value; 20,000,000
shares
authorized, 4,708,186 and 4,188,245 shares
issued
and outstanding in 1997 and 1996, respectively 4,708 4,188
Capital in excess of par value 4,972,032 3,618,910
Accumulated deficit (916,538) (1,174,868)
Total stockholders' equity 4,060,202 2,448,230
Total liabilities and stockholders' equity $5,228,648 $3,471,704
MARKET GUIDE INC.
Statements of Operation and Accumulated Deficit
For the Years Ended
Feb 28, 1997 Feb 29, 1996 Feb 28, 1995
Revenues:
Database vendors $4,150,777 $3,674,830 $2,432,007
Market Guide products 563,788 257,001 181,413
Print product 61,853 67,928 74,530
Total revenues 4,776,418 3,999,759 2,687,950
Expenses:
Salaries, payroll taxes & 2,692,063 2,121,109 1,375,007
employee benefits
Database and product costs 683,289 521,903 454,489
General and administrative 961,663 724,406 440,826
Advertising and promotion 138,961 87,702 55,451
Total expenses 4,475,976 3,455,120 2,325,773
Income from operations 300,442 544,639 362,177
Interest income 31,128 24,641 0
Interest expense (75,592) (60,974) (6,893)
Income before income taxes 255,978 508,306 355,284
Provision for income taxes (2,351) 1,127 16,846
Net income $258,329 $507,179 $338,438
Accumulated deficit, beginning (1,174,868) (1,682,047) (2,020,485)
of year
Accumulated deficit, end of ($916,539) ($1,174,868) ($1,682,047)
year
Earnings per share:
Primary $0.06 $0.12 $0.08
Fully diluted $0.06 $0.12 $0.08
Weighted average number of
shares
outstanding:
Primary 4,250,124 4,165,457 4,052,950
Fully diluted 4,408,378 4,401,135 4,256,999
MARKET GUIDE INC.
Statements of Cash Flows
For the Years Ended
Feb 28, 1997 Feb 29, 1996 Feb 28, 1995
(restated) (restated)
Cash Flows From Operating
Activities:
Net income $258,329 $507,179 $338,438
Adjustments to reconcile net income
to
net cash provided by operating 516,648 348,899 249,613
activities:
Depreciation and amortization
Changes in assets and liabilities:
(Increase)/Decrease in accounts 203,765 (202,367) (227,141)
receivable
(Increase)/Decrease in prepaid 781 (199,540) (64,789)
assets
(Increase)/Decrease in deposits and (14,858) (6,750) (49,855)
other assets
(Increase)/Decrease in accounts (222,053) 185,548 (7,177)
payable
(Increase)/Decrease in unearned 85,308 (39,494) (55,813)
revenues
Total adjustments 569,591 86,296 (155,162)
Net cash provided by operating 827,920 593,475 183,276
activities
Cash Flows From Investing
Activities:
Payments for purchase of fixed (695,447) (372,475) (377,909)
assets
Payments for leasehold improvements (72,509) 0 0
Development of computer software
and
product enhancements (1,145,213) (519,488) (344,246)
Net cash used by investing (1,913,169) (891,963) (722,155)
activities
Cash Flows From Financing
Activities:
Payments for notes payable, long-
term debt and
capital leases (250,392) (60,428) (57,134)
Proceeds from capital leases 532,110 246,984 176,394
Proceeds from issuance of
employee's and
director's stock plan 51,869 64,129 60,844
Proceeds from private placement of
common
stock 1,201,771 0 853,370
Proceeds from stock options 100,001 33,451 0
exercised
Net cash provided by financing 1,635,359 284,136 1,033,474
activities
Net increase/(decrease) in cash 550,110 (14,352) 494,595
Cash at beginning of year 680,783 695,135 200,540
Cash at end of year $1,230,893 $680,783 $695,135
Supplemental disclosure of cash
flow information:
Cash paid during the year for:
Interest $137,578 $60,974 $31,443
Corporate taxes 4,200 5,250 28,611
MARKET GUIDE INC.
Statements of Stockholders' Equity
Capital In Total
Excess of Accumulated Stockholders'
Shares Par Value Par Value Deficit Equity
Balance at February 28, 1994 3,505,129 $3,505 $2,607,799 $(2,020,485) $590,819
Issuance of common stock in a private 568,930 569 852,801 0 853,370
placement for cash
Issuance of common stock pursuant to 38,638 39 60,805 0 60,844
employee stock plan
Net income for the year 0 0 0 338,438 338,438
Balance at February 28, 1995 4,112,697 4,113 3,521,405 (1,682,047) 1,843,471
Stock options exercised 45,717 45 33,406 0 33,451
Issuance of common stock pursuant to 29,831 30 64,099 0 64,129
employee stock plan
Net income for the year 0 0 0 507,179 507,179
Balance at February 29, 1996 4,188,245 4,188 3,618,910 (1,174,868) 2,448,230
Issuance of common stock in a private 343,363 344 1,201,428 0 1,201,772
placement for cash
Stock options exercised 158,334 158 99,843 0 100,001
Issuance of common stock pursuant to
employee's
and director's stock plans 18,244 18 51,851 0 51,869
Net income for the year 0 0 0 258,329 258,329
Balance at February 28, 1997 4,708,186 $4,708 $4,972,032 $(916,539) $4,060,201
MARKET GUIDE INC.
Notes to Financial Statements
February 28, 1997, February 29, 1996 and
February 28, 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Nature of Business
Market Guide Inc. was incorporated on March 23, 1983, as The
Unlisted Market Service Corporation for the purpose of
collecting information to produce corporate profile reports on
unlisted publicly traded companies. On September 3, 1986, the
current corporate name was adopted. Market Guide is currently
engaged in acquiring, condensing, publishing and distributing
historical and current financial information to the
individual, financial services, and institutional investor
marketplaces.
The majority of the Company's revenue is derived from
approximately fifty third party vendors who distribute and
sell the Market Guide database. Sales are made through both
third party vendors and direct sales to end users.
2. Revenue Recognition
Database revenues from certain information vendors are not
completely known until after the end of the fiscal period. In
these instances, management uses estimates in recording vendor
revenue in accordance with generally accepted accounting
principles. Accordingly, actual results could differ from
these estimates. Subsequent adjustments are made after actual
collection.
Print product revenues and Market Guide for Windows revenues
are deferred at the time of sale and recognized ratably as
revenues over the terms of their subscriptions. Costs
associated with procurement of these revenues are expensed as
incurred. When CreditRisk Monitor sales begin, they will also
follow this practice.
Bad debts are recorded under the allowance method of
accounting. For the years ended February 28, 1997, February
29, 1996 and February 28, 1995, $5,000, $15,000 and $15,000
were charged to bad debt expense, respectively. As of February
28, 1997 and February 29, 1996, the allowance for doubtful
accounts was $24,207 and $30,000, respectively.
3. Property and Equipment
Depreciation and amortization are provided for in amounts
sufficient to relate the cost of depreciable assets to
operations over their estimated service lives. Leased
property under capital leases is amortized over the lives of
the respective leases or over the service lives of the assets
for those leases which substantially transfer ownership. The
straight-line method
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
of depreciation is followed for substantially all assets for
both financial and tax reporting purposes.
4. Capitalization of Computer Software and Product Enhancements
Management has elected, pursuant to SFAS No. 86, to capitalize
computer software costs incurred for new product development
and product enhancements for the period beginning March 1,
1989. These costs are reported at the lower of unamortized
cost or net realizable value. The amortization of these costs
are included in database and product cost. All research and
development, database maintenance and customer support costs
are expensed as incurred.
The straight-line method of amortization is used over the
estimated economic life of the asset. For the years ended
February 28, 1997, February 29, 1996 and February 28, 1995,
$288,072, $199,233 and $179,656, respectively, were charged to
amortization expense. As of February 28, 1997 and February 29,
1996, accumulated amortization was $1,172,555 and $884,483,
respectively.
5. Earnings Per Share
Primary earnings per share are computed based on the weighted
average number of shares of Common Stock outstanding. Fully
diluted earnings per share are calculated based on the
weighted average number of shares and include outstanding
stock options.
6. Fair Value of Financial Instruments
The following methods and assumptions were used by the Company
in estimating its fair value disclosures for financial
instruments:
Cash and cash equivalents: The carrying amounts of cash and
cash equivalents approximate their fair values.
Capital lease obligations: The carrying amounts of capital
lease obligations approximate their fair value.
7.Employee Benefit Plan
The Company established a 401(k) plan effective January 1,
1997 for all employees with over six months of service. On an
annual basis, the employees may contribute the lesser of 15%
of gross salary or $9,500. The Company matches 50% of the
first 6% of the employees' contribution. Participants are
vested 20% for each year of service and are fully vested after
5 service years. For the fiscal year ended February 28, 1997,
the Company contributed $16,791 to the plan.
NOTE B - LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS
02/28/97 02/29/96
12% Demand note (a) $ 0 $ 95,333
Capital lease obligations 740,274 363,224
740,274 458,557
Less: Current maturities 176,012 167,355
Total long-term debt
and capitalized leases $ 564,262 $ 291,202
(a) The holder of this note is an Officer and
Director of the Company.
Annual scheduled principal maturities of long-term debt and
capital lease obligations as of February 28, 1997 are as follows:
Capital Lease Total of Long-Term
Long-Term Obligations Debt and Capital
Debt Lease Obligations
Year Ending February 28(29),
1998 $ -0- $ 176,012 $ 176,012
1999 -0- 195,405 195,405
2000 -0- 201,625 201,625
2001 -0- 140,486 140,486
2002 -0- 26,746 26,746
TOTAL $ -0- $ 740,274 $ 740,274
NOTE C - COMMITMENTS AND CONTINGENCIES
1. Capital Leases
The schedule of future minimum lease payments for the
Company's capital leases and the present value of the net
minimum lease payments are as follows:
Year ending February 28 (29), 1998 $ 176,012
1999 195,405
2000 201,625
2001 140,486
2002 26,746
Total minimum lease payments $ 740,274
Less: Amounts representing interest 166,898
Present value of net minimum
lease payments $ 573,376
2. Operating Leases
The Company rents its three office facilities under operating
leases. Two of the offices are located in Lake Success, New York
with a lease expiration in October 2005, and the other office is
located in Chicago, Illinois with a lease expiration in May 1998.
For the periods ended February 28, 1997, February 29, 1996 and
February 28, 1995; $205,975, $127,910 and $88,020 were charged to
rent expense, respectively.
The Company can exercise a buyout option for the Lake Success,
New York offices in October 2001 for the amount of $165,134. The
annual minimum lease payments under the operating leases as of
February 28, 1997 are:
Year ending February 28 (29), 1998 $ 375,804
1999 441,394
2000 452,836
2001 467,169
2002 482,051
2003 497,473
2004 513,337
2005 529,812
2006 360,740
Total $ 4,120,616
NOTE C - COMMITMENTS AND CONTINGENCIES (continued)
3. Legal Proceedings
The Company is currently involved in a pending lawsuit. The
ultimate outcome of this litigation is unknown at the present
time. Accordingly, no provision for any liability has been made
to the accompanying financial statements. Management does not
believe that the pending action will have a material effect on
the business activities of the Company.
NOTE D - INCOME TAXES
The Company has adopted SFAS 109 and as of February 28, 1997 has
net operating loss and investment tax credit carryforwards in the
amount of $895,735 and $10,524, respectively. Pursuant to SFAS
109, management believes that it does not have a greater than 50%
probability of realization of such loss carryforwards and credits
and has decided to provide for a full valuation allowance. The
investment tax credits will begin to expire, if unused, in the
fiscal year ending February 28, 1999. Annual fiscal year
expirations total $3,588 in 1999; $5,470 in 2000; $1,466 in 2001.
Net operating losses will begin to expire, if unused, in the
fiscal year ending February 29, 2002. Annual fiscal year
expirations total $607,252 in 2002 and $288,483 in 2003. The
Company has recorded deferred tax assets related to the allowance
for doubtful accounts in deposits and other assets. As of
February 28, 1997 and February 29, 1996 the deferred tax assets
were $11,116 and $13,500, respectively.
The components of provision for income taxes (credits) are as
follows:
For the Years Ended
2/28/97 2/29/96 2/28/95
Current
Federal $ -0- $ 2,900 $ -0-
State and Local (4,734) 4,977 23,596
Deferred
Federal 1,801 (5,100) (5,100)
State and Local 582 (1,650) (1,650)
TOTALS $ (2,351) $ 1,127 $ 16,846
NOTE D - INCOME TAXES (continued)
Total income tax expense differs from the expected tax expense
(computed by applying the U.S. Federal statutory income tax rate
of 34% to income before income taxes) as follows:
02/28/97 % 02/29/96 % 02/28/95 %
Tax at Federal statutory rate $ 87,033 34.0 $ 172,824 34.0 $ 120,797 34.0
Federal alternative minimum tax -0- 0.0 2,900 0.6 -0- 0.0
State income taxes, net of (2,542) (1.0) 1,636 0.3 13,924 3.9
Federal tax benefit
Net operating loss
carryforwards, utilized (88,324) (34.5) (179,716) (35.4) (118,772) (33.4)
Graduated tax bracket
differential (1,744) (0.7) -0- 0.0 -0- 0.0
Non deductible expenses 3,226 1.3 3,483 0.7 897 0.2
TOTALS $ (2,351) (0.9) $ 1,127 0.2 $ 16,846 4.7
Income taxes payable as of February 28, 1997, February 29, 1996
and February 28, 1995 are as follows:
2/28/97 2/29/96 2/28/95
Federal $ -0- $ 2,900 $ -0-
State and Local 929 -0- 4,175
TOTALS $ 929 $ 2,900 $ 4,175
NOTE E - STOCKHOLDERS' EQUITY
1. Common Stock
On January 27, 1997 the Company raised $1,201,771 through the
sale of 343,363 shares of restricted common stock at a price of
$3.50 per share in a private placement to a limited number of
institutional and individual investors.
On March 21, 1994 the Company raised $853,370 through the sale of
568,930 shares of restricted common stock at a price of $1.50 per
share, adjusted for the October 1995 one-for-four
NOTE E - STOCKHOLDERS' EQUITY (continued)
reverse stock split, in a private placement with a limited number
of institutional and individual investors.
On August 11, 1994 the Company created a stock bonus program for
employees based upon merit and years of service. The bonus was
awarded in four equal quarterly installments in the periods
ending August 1994, November 1994, February 1995 and May 1995,
subject to an employee's continued employment on the dates of
each award. For the period ending February 28, 1995, the Company
issued 38,638 restricted shares at a total cost of $60,844. In
the period ending February 29, 1996, the Company issued 29,831
restricted shares at a total cost of $64,129. For the period
ended February 28, 1997, the Company did not issue any stock
bonus.
The Company adopted an Employee Stock Purchase Plan effective
September 1, 1995. The Employee Stock Purchase Plan is intended
to qualify under Section 423 of the Internal Revenue Code. Under
the terms of the Plan, 125,000 shares are available for purchase.
The purchase price will be the lesser of an amount equal to 85%
of the fair market value of stock calculated on the lower of the
average of the stock's closing price for a full fiscal quarter or
the average of the stock's closing price for the last five
trading days of a fiscal quarter. As of the end of February
1997, 10,244 shares had been purchased under this plan at a total
cost of $31,388.
2. Common Stock Options
In May 1993 the Company granted options to two officers for the
purchase of 125,000 shares of restricted Common Stock at an
exercise price of $0.40 per share, adjusted for the October 1995
one-for-four reverse stock split, through February 28, 1998.
These options were exercised on January 2, 1997.
In March 1994 the Company granted options to two officers for the
purchase of 33,334 shares of restricted Common Stock at an
exercise price of $1.50 per share, adjusted for the October 1995
one-for-four reverse stock split, through February 28, 1999.
These options were exercised on January 2, 1997.
In March 1995 the Company granted options to two officers for the
purchase of 25,000 shares of restricted Common Stock at an
exercise price of $2.68 per share, adjusted for the October 1995
one-for-four reverse stock split, through February 29, 2000.
The Company adopted an Incentive Stock Option Plan for key
employees effective September 1, 1995. The Incentive Stock
Option Plan is intended to qualify under Section 422 of the
Internal Revenue Code. Under the terms of the Plan, incentive
stock options or non-qualified stock options may be granted and
93,750 shares were made available. The option price cannot be
less than 100% of the fair market value of the stock as
determined by the Company's Board of Directors on the date of the
grant of the option. As of February 28, 1997, there were no
options granted or exercised.
The Company adopted an Independent Director's Stock Incentive
Plan effective September 1, 1995. Under the terms of the Plan,
only non-qualified stock options may be
NOTE E - STOCKHOLDERS' EQUITY (continued)
granted and 12,500 shares were made available. The option price
is determined by a Committee of three disinterested persons
appointed by the Board of Directors on the date of grant of the
option. As of February 28, 1997, there were no options granted
or exercised.
NOTE F - REVERSE STOCK SPLIT
On August 31, 1995 the shareholders approved a one-for-four
reverse stock split of the Company's $.001 par value common
stock. The reverse stock split was effective as of October 16,
1995. All references in the accompanying financial statements to
the per share amounts and earnings per share have been restated
to reflect the reverse stock split for all periods presented.
NOTE G - MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK
The Company has two major customers accounting for total sales of
$1,041,830 for the year ending February 28, 1997. They are
OneSource and Reuters.
As of February 28, 1997, the Company had $1,076,088 on deposit at
First National Bank of Long Island and $139,052 on deposit at
Rocky Mountain Securities.
NOTE H - SUBSEQUENT EVENTS
On March 5, 1997, the Company's stock commenced trading on a
Nasdaq SmallCap Market under the symbol MARG.
On April 4, 1997, CreditRisk Monitor, an Internet-based financial
information and real-time news service targeted at the credit
industry, began operating activities.
On April 15, 1997, the Company secured a $1,000,000 line of
credit with Fleet Bank. The credit line is secured by a first-
priority perfected security interest in all present and future
assets of the Company. The Company must maintain net earnings on
a consolidated basis of no less than $1 in any fiscal year, and
total consolidated liabilities to tangible net worth may not
exceed 1.5 to 1.0 at any fiscal quarter end. The interest rate
on the line of credit ranges from prime rate plus % to prime rate
plus %.
NOTE I - RECLASSIFICATION OF FINANCIAL STATEMENT PRESENTATION
The Company has reclassified deferred interest charges of capital
leases and certain computer software purchases. These
reclassifications have been made to the 1996 and 1995 financial
statements to conform with the 1997 financial statement
presentation. Such reclassifications had no effect on net income
as previously reported.
NOTE J - SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
Selected quarterly financial data for the years ended February
28, 1997 and February 29, 1996 are presented in the following
table:
Three Months Ended
May 31, 1996 August 31, 1996 November 30, 1996 February 28, 1997
Total revenues $ 1,131,106 $ 1,117,148 $ 1,256,688 $ 1,271,476
Operating income 150,374 45,068 124,052 (19,052)
Income before taxes 139,032 38,092 108,874 (30,020)
Net income 137,712 37,442 107,341 (24,166)
Earnings per share .03 .01 .03 (.01)
Weighted average number of
shares outstanding 4,188,272 4,192,088 4,195,172 4,428,238
Fully diluted earnings per .03 .01 .02 .00
share
Fully diluted weighted
average number of shares 4,371,701 4,375,517 4,378,601 4,509,568
outstanding
May 31, 1995 August 31, 1995 November 30, 1995 February 29, 1996
Total revenues $ 890,341 $ 970,580 $ 1,063,124 (1) $ 1,075,714 (2)
Operating income 87,093 116,394 190,933 150,219
Income before taxes 81,971 109,196 184,780 132,359
Net income 77,053 101,552 173,693 (1) 154,881 (2)
Earnings per share $.02 $.02 $.04 $.04
Weighted average number of
shares outstanding 4,116,737 4,174,470 4,182,802 4,188,259
Fully diluted earnings per $.02 $.02 $.04 $.04
share
Fully diluted weighted
average number of shares 4,379,037 4,409,171 4,409,171 4,409,171
outstanding
(1) Total revenues and net income were overstated by approximately
$25,000 due to Fourth Quarter revenues inadvertently
included in totals.
(2) Total revenues and net income were understated by approximately
$25,000 due to revenues inadvertently included in Third
Quarter totals (see (1) above).
Schedule of Indebtedness of and to Related Parties
Balance At
Beginning Of End of
Year Additions Reductions Year
February 28, 1997
John D. Case $ 95,333 $ -0- $ 95,333 $ -0-
$ 95,333 $ -0- $ 95,333 $ -0-
February 29, 1996
John D. Case $ 95,333 $ -0- $ -0- $ 95,333
$ 95,333 $ -0- $ -0- $ 95,333
February 28, 1995
John D. Case $ 125,333 $ -0- $ 30,000 $ 95,333
$ 125,333 $ -0- $ 30,000 $ 95,333
Schedule of Property, Plant and Equipment
Balance At
Beginning Additions End of
Of Year At Cost Retirements Year
February 28, 1997
Machinery & Equipment $ 571,525 $ 262,709 $ -0- $ 834,234
Capitalized Leased 543,655 399,294 -0- 942,949
Equipment
Office Equipment 36,112 -0- -0- 36,112
Furniture & Fixtures 32,307 33,444 -0- 65,751
Leasehold Improvements -0- 72,509 -0- 72,509
TOTAL $ 1,183,599 $ 767,956 $ -0- $ 1,951,555
February 29, 1996
Machinery & Equipment $ 446,033 $ 125,492 $ -0- $ 571,525
Capitalized Leased 296,672 246,983 -0- 543,655
Equipment
Office Equipment 36,112 -0- -0- 36,112
Furniture & Fixtures 32,307 -0- -0- 32,307
Leasehold Improvements -0- -0- -0- -0-
TOTAL $ 811,124 $ 372,475 $ -0- $ 1,183,599
February 28, 1995
Machinery & Equipment $ 267,919 $ 178,114 $ -0- $ 446,033
Capitalized Leased 106,983 189,689 -0- 296,672
Equipment
Office Equipment 36,112 -0- -0- 36,112
Furniture & Fixtures 22,201 10,106 -0- 32,307
Leasehold Improvements 4,859 -0- 4,859 -0-
TOTAL $ 438,074 $ 377,909 $ 4,859 $ 811,124
Schedule of Accumulated Depreciation and Amortization of
Property, Plant and Equipment
Balance At
Beginning End of
Of Year Depreciation Retirements Year
February 28, 1997
Machinery & Equipment $ 302,109 $ 189,411 $ -0- $ 491,520
Capitalized Leased
Equipment 154,233 35,001 -0- 189,234
Office Equipment 36,112 -0- -0- 36,112
Furniture & Fixtures 23,521 2,964 -0- 26,485
Leasehold Improvements -0- 1,200 -0- 1,200
TOTAL $ 515,975 $ 228,576 $ -0- $ 744,551
February 29, 1996
Machinery & Equipment $ 224,526 $ 77,583 $ -0- $ 302,109
Capitalized Leased 84,002 70,231 -0- 154,233
Equipment
Office Equipment 36,112 -0- -0- 36,112
Furniture & Fixtures 21,669 1,852 -0- 23,521
Leasehold Improvements -0- -0- -0- -0-
TOTAL $ 366,309 $ 149,666 $ -0- $ 515,975
February 28, 1995
Machinery & Equipment $ 180,670 $ 43,856 $ -0- $ 224,526
Capitalized Leased
Equipment 58,677 25,325 -0- 84,002
Office Equipment 36,112 -0- -0- 36,112
Furniture & Fixtures 20,893 776 -0- 21,669
Leasehold Improvements 4,859 -0- 4,859 -0-
TOTAL $ 301,211 $ 69,957 $ 4,859 $ 366,309
Schedule of Computer Software and Product Enhancements
Balance At
Beginning Of
Year Additions Retirement Total
February 28, 1997
Computer Software $ 1,918,963 $ 1,145,213 $ -0- $ 3,064,176
TOTAL $ 1,918,963 $ 1,145,213 $ -0- $ 3,064,176
February 29, 1996
Computer Software $ 1,399,475 $ 519,488 $ -0- $ 1,918,963
TOTAL $ 1,399,475 $ 519,488 $ -0- $ 1,918,963
February 28, 1995
Computer Software $ 1,055,229 $ 344,246 $ -0- $ 1,399,475
TOTAL $ 1,055,229 $ 344,246 $ -0- $ 1,399,475
Schedule of Accumulated Amortization of Computer Software
and Product Enhancements
Balance At
Beginning Of
Year Amortization Retirement Total
February 28, 1997
Computer Software $ 884,483 $ 288,072 $ -0- $ 1,172,555
TOTAL $ 884,483 $ 288,072 $ -0- $ 1,172,555
February 29, 1996
Computer Software $ 685,250 $ 199,233 $ -0- $ 884,483
TOTAL $ 685,250 $ 199,233 $ -0- $ 884,483
February 28, 1995
Computer Software $ 505,594 $ 179,656 $ -0- $ 685,250
TOTAL $ 505,594 $ 179,656 $ -0- $ 685,250