UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended November 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number: 2-91525-NY
MARKET GUIDE INC
(Exact name of Registrant as specified in its charter)
New York 11-2646081
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2001 Marcus Avenue
Suite South 200
Lake Success, New York 11042-1011
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (516) 327-2400
Former name, former address and former fiscal year, if changed since last report
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 _______
4,718,171 Common shares, $.001 par value were issued and outstanding on
January 2, 1998.
Table of Contents
Financial Statements
Balance Sheets as of November 30, 1997 (Unaudited) and February 28, 1997 3
Statement of Operations for the Three and Nine Months Ended
November 30, 1997 (Unaudited) and November 30, 1996 (Unaudited) 5
Statement of Cash Flows for the Nine Months Ended
November 30, 1997 (Unaudited) and November 30, 1996 (Unaudited) 6
Notes to Financial Statements 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations November 30, 1997 14
Other Information 17
Signature 18
MARKET GUIDE INC.
Balance Sheets
November 30, 1997 February 28, 1997
(Unaudited)
ASSETS
Current assets:
Cash $ 692,456 $ 1,230,893
Accounts Receivable (net of allowance for doubtful
accounts) 1,179,463 557,415
Prepaid expenses and other current assets 119,640 263,630
-------------------------- -------------------------
Total current assets 1,991,559 2,051,938
Property, plant and equipment:
Furniture and equipment 1,497,700 936,097
Equipment held under capital leases 942,949 942,949
Leasehold improvements 76,710 72,509
-------------------------- -------------------------
2,517,359 1,951,555
Less: Accumulated depreciation and amortization
(including amortization of capital leases totaling
$323,016 and $189,234 as of November 30, 1997 and February
28, 1997, respectively) 1,012,962 744,551
-------------------------- -------------------------
Net property, plant and equipment 1,504,397 1,207,004
Other assets:
Computer software and product enhancements (net
of accumulated amortization) 2,595,153 1,891,621
Deposits and other assets 78,083 78,085
-------------------------- -------------------------
Total other assets 2,673,236 1,969,706
-------------------------- -------------------------
Total assets $ 6,169,192 $ 5,228,648
MARKET GUIDE INC.
Balance Sheets - continued
November 30, 1997 February 28, 1997
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Current maturities of long-term debt and capital leases $ 190,496 $ 176,012
Unearned revenues 936,951 248,679
Accounts payable and other accrued expenses 266,649 179,493
------------------------ ---------------------
Total current liabilities 1,394,096 604,184
Non-current liabilities:
Long-term debt and capital lease obligations, less
current maturities 796,330 564,262
------------------------ ---------------------
Total non-current liabilities 796,330 564,262
Commitments 0 0
------------------------ ---------------------
Total liabilities 2,190,426 1,168,446
Stockholders' equity:
Common stock - $.001 par value; 20,000,000 shares authorized, 4,718,171 and
4,708,186 shares issued and outstanding as of November 30, 1997 and
February 28,
1997, respectively 4,718 4,708
Capital in excess of par value 4,996,811 4,972,032
Accumulated deficit (1,022,763) (916,538)
------------------------ ---------------------
Total stockholders' equity 3,978,766 4,060,202
------------------------ ---------------------
Total liabilities and stockholders' equity $ 6,169,192 $ 5,228,648
MARKET GUIDE INC.
Statement of Operations
(Unaudited)
For the 3 Months Ended For the 9 Months Ended
--------------------------------- --------------------------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1997 1996 1997 1996
Revenues:
Database vendors $1,229,699 $1,067,546 $3,682,997 $3,104,059
Market Guide products 502,582 173,353 1,145,440 355,487
Print product 11,014 15,789 40,184 45,416
------------ ----------- ------------ -------------
Total revenues 1,743,295 1,256,688 4,868,621 3,504,962
Expenses:
Salaries, payroll taxes & employee 1,033,111 693,961 2,972,261 1,956,084
benefits
Database and product costs 223,783 169,879 638,063 510,773
General and administrative 388,910 229,850 1,082,941 621,529
Advertising and promotion 62,396 38,946 235,291 97,063
------------ ------------- ------------ ----------
Total expenses 1,708,200 1,132,636 4,928,556 3,185,449
------------- ------------- ------------- -------------
Income from operations 35,095 124,052 (59,935) 319,513
Interest income 4,373 7,985 16,937 22,870
Interest expense 21,975 23,163 61,227 56,365
----------- ----------- ------------ ------------
Income before income taxes 17,493 108,874 (104,225) 286,018
Provision for income taxes 0 1,533 2,000 3,503
------------ ---------- ------------- ---------
Net income $17,493 $107,341 ($106,225) $282,515
Earnings per share:
Primary $0.00 $0.03 ($0.02) $0.07
Fully diluted $0.00 $0.02 ($0.02) $0.06
Weighted average number of shares outstanding:
Primary 4,713,709 4,195,172 4,710,560 4,191,832
Fully diluted 4,753,709 4,378,601 4,741,287 4,375,261
MARKET GUIDE INC.
Statement of Cash Flows
(Unaudited)
For the 9 Months Ended
Nov. 30, Nov. 30,
1997 1996
Cash Flows From Operating Activities:
Net income $ (106,225) $ 282,515
----------------- -----------------
Adjustments to reconcile net income to net cash provided from
operating activities
Depreciation and amortization 584,515 368,108
Changes in assets and liabilities:
(Increase)/Decrease in accounts receivable (622,048) 163,728
(Increase)/Decrease in prepaid assets 143,990 10,086
(Increase)/Decrease in deposits and other assets 2 (6,513)
Increase/(Decrease) in accounts payable 87,156 (73,108)
Increase/(Decrease) in unearned revenues 688,272 255,026
----------------- -----------------
Total adjustments 881,887 717,327
----------------- -----------------
Net cash from operating activities 775,662 999,842
----------------- -----------------
Cash Flows From Investing Activities:
Payments for purchase of fixed assets (561,603) (429,470)
Payments for leasehold improvements (4,201) (17,647)
Development of computer software and product enhancements (1,019,635) (639,688)
----------------- -----------------
Net cash from investing activities (1,585,439) (1,086,805)
----------------- -----------------
Cash Flows From Financing Activities:
Payments for notes payable, long-term debt and capital leases (133,079) (111,137)
Proceeds from capital leases 0 380,215
Proceeds from equipment line of credit 379,630 0
Proceeds from sale of stock under employee stock plan 24,789 26,464
Proceeds from private placement of common stock 0 0
----------------- -----------------
Net cash from financing activities 271,340 295,542
----------------- -----------------
Net increase/(decrease) in cash (538,437) 208,579
Cash at beginning of period 1,230,893 680,783
----------------- -----------------
Cash at end of period $ 692,456 $ 889,362
Market Guide Inc.
Notes to Financial Statements
November 30, 1997
Note 1 INTERIM FINANCIAL STATEMENTS
The accompanying financial statements of Market Guide Inc. have been prepared
without audit, except for the balance sheet as of February 28, 1997. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the nine months ended November 30, 1997 are not
necessarily indicative of the results that may be expected for the year ending
February 28, 1998.
Note 2 BANK LINE OF CREDIT
On September 1, 1997, the Company and Fleet Bank extended the line of credit for
an additional year with all the original terms and conditions remaining in
effect. The line of credit extension expires on August 31, 1998.
During the third quarter ended November 30, 1997, the Company borrowed an
additional $116,625 under its line of credit with Fleet Bank. As of November 30,
1997, the Company had borrowed a total of $379,630 for the purpose of funding
purchases of capital equipment (principally computers and peripherals). The
bank line was utilized in lieu of alternative leasing arrangements used in the
past.
Note 3 DEPRECIATION AND AMORTIZATION
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 of depreciation is
followed for substantially all assets for both financial and tax reporting
purposes.
Note 4 COMMON SHARES OUTSTANDING
In January 1997, Market Guide sold 343,363 shares of common stock in a private
placement to selected investors.
Shares outstanding as of November 30, 1996 4,196,905
Shares sold in private placement 343,363
Shares sold under employee stock purchase plan 11,569
Shares sold and exercised in options 166,334
Shares outstanding November 30, 1997 4,718,171
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 products and services for the corporate credit
manager and other applications delivered to corporate subscribers over the
Internet (www.creditriskmonitor.com).
Market Guide 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 10,000 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 and publications. Each company's fundamental 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:
o Its ability to retain the unique reporting details of each company.
This gives users important insights not available in competitive
databases, and enables them to make better informed investment
decisions;
o 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;
o Calculation of over 500 popular financial ratios, growth rates, and
averages computed for the user's convenience; o 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; and
o Developing efficient, timely, cost-effective and easy to use delivery
systems such as our CD/ROM based analytic service - Market Guide for
Windows, our Internet site (www.marketguide.com) and the CreditRisk
Monitor Internet 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 site (www.marketguide.com), Market Guide for Windows
(its proprietary CD/ROM based analytic software) and a print publication.
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;
Ameritrade Holding; Argus Research; Aufhauser; Automatic Data Processing; AIQ
Systems, Inc.; Bridge Information Systems Inc.; Briefing.com; Business Wire;
CDA Technology; Charles Schwab and Company; Data Broadcasting Corporation;
Devonshire Technology; Dial/Data; Dow Jones PIR Corporate Profiles; Dow Jones
Telerate; EuroAmerican Group; FactSet Research; First Call
Corporation; Global Market Information; Go2Net; Holt Value Associates; IBM
Infomarket; ILX Systems Inc.; Individual Investor Magazine; Instinet Analytics;
Interactive Data Corporation; Interactive Workplace; Internet Securities;
Investools, Inc.; Los Angeles Times; Money Club; MX Net; News Alert; NewsWare;
Omega Research; OneSource Information Services, Inc.; Pacific Brokerage
Services; Papyrus Technology Inc.; P.C. Quote, Inc.; PointCast; PR Newswire;
Prodigy Services Company; Quote.com; Quotes Plus; Quotron Systems, Inc.; Real
Time Quotes, Inc.; Reality Online; Reuters Ltd., Securities Data Corporation;
Shark Information Services, Inc.; Telemet America, Inc.; Telescan, Inc.; Track
Data Corporation; Track Online; Vickers Stock Research Corporation; Wall Street
on Demand; Westergaard Publishing; Windows on Wall Street and Yahoo!
Business Developments
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 in weekly, monthly or quarterly update formats.
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's Internet site began operation in August 1996. 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. Amongst our
co-branded sites are brokerage firms such as Charles Schwab & Co.,
Ameritrade Holding, and Pacific Brokerage Services; and other sites such as
Yahoo!, PointCast, the Los Angeles Times and Individual Investor Magazine.
A version of the Market Guide for Windows software with a smaller information
set is sold over the Internet to individual investors under the product name
StockQuest. StockQuest was also introduced in August 1996.
In September 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.
In September 1997, the Company announced a multi-year agreement with America
Online to provide financial and investment information to AOL. It is anticipated
this service will become operational in March 1998.
In September 1997, the Company also announced a distribution agreement with
Riemer Reporting Services, Inc. to distribute CreditRisk Monitor products and
services. Riemer Reporting Services is a leading provider of national credit
network services to users of business credit information.
In December 1997, the Market Guide database became accessible through FactSet
Data Systems, a premier service for the professional investor.
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 due to mergers, acquisitions,
bankruptcy, delisting or moving to the New York or American Stock Exchanges.
Companies dropped from the book are replaced by companies which are selected by
using proprietary Market Guide selection criteria. The companies selected for
inclusion in the book have, as a group, regularly outperformed the Nasdaq
composite as a whole.
Database Enhancements
The Company continuously expands, enhances and improves the Market Guide
Database based on customer suggestions and employee feedback.
In the fall of 1994, Market Guide introduced a completely new set of 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:
o Identify which industry and sectors are outperforming the market or have
fallen from favor; o Compare companies to a well defined peer group; o Permit
investors to construct and analyze industry aggregate financial characteristics;
o Properly construct portfolios to ensure adequate diversification; and o 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 had 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 this project, Market Guide now has annual financial statement information
going back to 1983 for most companies on its database. As a result of the
completion of this project, Market Guide believes it 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 implement such plans for
shareholder reinvestment of dividends.
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.
In June 1997, the Company began creating new software and systems to enable it
to collect more information on more companies; do it better and faster; and to
create new products more quickly and inexpensively. Using state-of-the-art
Microsoft SQL Server software, these new systems will give Market Guide
competitive database superiority and strategic advantages in product
flexibility.
Internet
The Company has created a dynamic, comprehensive and extremely useful Internet
site. The site contains both advertising supported subscription based
content.
Advertising supported content is free to the user and Market Guide expects to
cover costs and generate profits from the sale of advertising. As of August
1997, 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, the Company continues 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 that are delivered 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 traded
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
became operational in April 1997.
In November 1997, the Market Guide Board of Directors was presented with a
request to consider, in principle, a divisional management led purchase of the
CreditRisk Monitor division. The directors agreed to consider and evaluate
any proposal received.
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.
Market Guide Inc.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
November 30, 1997
Results of Operations
For the three months ended November 30, 1997 compared to November 30, 1996
Total revenues for three months ended November 30, 1997 increased 39% to
$1,743,295. The growth in revenues reflects increases of 15% in database vendor
sales to $1,229,699 and 190% in Market Guide product sales to $502,582. The
revenue growth is attributable to continued sales to our traditional core of
vendors that sell to the institutional, retail and individual investor
marketplaces, new revenue from the addition of more than twenty Internet related
vendors, growth in sales at our own web site (www.marketguide.com), incremental
sales of Market Guide for Windows products, and the introduction of CreditRisk
Monitor's Internet-based service (www.creditriskmonitor.com). Print product
revenues, consisting mainly of the Market Guide - Select OTC Stock Edition,
decreased 30% to $11,014. Market Guide continues to concentrate on
marketing electronic products and services.
Total operating expenses for three months ended November 30, 1997 increased 51%
to $1,708,200. The largest component of this increase continues to be salaries
and operating expenses related to the CreditRisk Monitor division. Also
contributing to the increase in operating expenses were costs associated with
increased staffing levels in all departments, higher general and administrative
expenses, and increased sales and marketing activities. For financial reporting
purposes, CreditRisk Monitor sales are recognized over the full contract period
and expenses are recorded as incurred. The result is that CreditRisk Monitor
expenses substantially exceed recognized sales.
Net income from operations for three months ended November 30, 1997 decreased
72% to $35,095. The sharp decline in net income from operations is attributable
to the start-up of the CreditRisk Monitor division.
Interest income for three months ended November 30, 1997 decreased 45% to
$4,373. The decrease reflects lower cash balances throughout the quarter.
Interest expense for three months ended November 30, 1997 decreased 5% to
$21,975. The slight decline in interest expense reflects a higher portion of the
monthly capital lease payments being applied to principal reductions.
Net income for the three months ended November 30, 1997 decreased 84% to
$17,493. The decline in net income from the comparable quarter one year ago is
primarily attributable to expenses related to the CreditRisk Monitor division.
The third quarter marked the return to profitability for Market Guide after
three consecutive quarterly losses.
For the nine months ended November 30, 1997 compared to November 30, 1996
Total revenues for the nine months ended November 30, 1997 increased 39% to
$4,868,621. The increase in revenues reflects a 19% increase in database vendor
sales to $3,682,997 and Market Guide product sales growth of 222% to $1,145,440.
The revenue growth continues to reflect increases in sales to our traditional
core of vendors that sell to the institutional, retail and individual investor
marketplaces, new revenue from the addition of more than twenty Internet related
vendors, growth in sales from our own web site (www.marketguide.com),
incremental sales of Market Guide for Windows products, and the introduction of
CreditRisk Monitor's internet-based service in April 1997. Print product
revenues, consisting mainly of the Market Guide - Select OTC Stock Edition,
decreased 12% to $40,184. The decline in print product sales reflects Market
Guide's decision to concentrate on marketing electronic products and services.
Total operating expenses for the nine months ended November 30, 1997 increased
55% to $4,928,556. The largest component of this increase continues to be
salaries and operating expenses related to the CreditRisk Monitor division.
Costs associated with increased staffing levels in all departments, higher
general and administrative expenses, and increased sales and marketing
activities also contributed to the increased level of expenses in the period.
For financial reporting purposes, CreditRisk Monitor sales are recognized over
the entire subscription period and expenses are recorded as incurred. The result
is that CRM expenses exceed recognized sales.
Loss from operations for the nine months ended November 30, 1997 totaled $59,935
compared to operating income of $319,513 for the nine months ended November 30,
1996. As noted above, the operating loss was primarily attributable to the
recognition of costs associated with CreditRisk Monitor, while associated
revenues will continue to build steadily over time.
Interest income for the nine months ended November 30, 1997 decreased 26% to
$16,937. The decrease reflects lower cash balances throughout the period.
Interest expense for the nine months ended November 30, 1997 increased 9% to
$61,227. Higher interest expense reflects additional capital lease
service requirements.
Net loss for the nine months ended November 30, 1997 totaled $106,225 compared
to net income of $282,515 in the nine months ended November 30, 1996. The loss
reflects increased costs as noted above.
Liquidity and Capital Resources
As of November 30, 1997, the Company's working capital (current assets less
current liabilities) decreased 59% to $597,463 when compared to the amounts at
February 28, 1997. The Company's cash and cash equivalents decreased 44% to
$692,456 when compared to the balance at February 28, 1997.
For the nine months ended November 30, 1997, net cash provided by operating
activities decreased 22% to $775,662 when compared to the nine months ended
November 30, 1996. The decrease reflects a higher accounts receivable balance
related to CreditRisk Monitor sales and an operating loss. Partially offsetting
this was a sharp increase in unearned revenues reflecting advance payments from
certain customers, higher non-cash expenses (depreciation and amortization), and
the accrual of one payroll week.
For the nine months ended November 30, 1997, net cash used in investing
activities increased 46% to $1,585,439 when compared to the nine months ended
November 30, 1996. The increase reflects the Company's continued investment in
product and database enhancements and in Market Guide's Internet site.
For the nine months ended November 30, 1997, net cash from financing activities
decreased 8% to $271,340 when compared to the nine months ended November 30,
1996. This result reflects increased payments to the Fleet Line of
Credit. In the third quarter, the Company and Fleet Bank extended the line of
credit for an additional year with all the original terms and conditions
remaining in effect. The line of credit extension expires on August 31, 1998.
The Company believes its current liquidity is sufficient to meet its obligations
during the next twelve months.
Other Information
Item 1 Legal Proceeding
The Company has 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 defendants' theft and use of the Company's newly
designed proprietary slogan "On-Line, On-Time, On-Target," developed for use
with its Internet credit reporting system. 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, and
primarily, three newly engaged employees. ICI claims misappropriation of
proprietary information and trade secrets by the newly engaged employees, unfair
competition, breach of fiduciary duty and tortious interference. Management
does not believe the pending actions will have a material effect on the
business activities of the Company.
Item 2 Changes in Securities None
Item 3 Defaults Upon Senior Securities None
Item 4 Submission of Matters to Vote of Security Holders None
Item 5 Exhibits and Reports on Form 8-K None
Signature
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.
MARKET GUIDE INC.
(Registrant)
/s/ Homi M. Byramji
Date HOMI M. BYRAMJI
January 15, 1998 President and CEO