United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Period of Three Months Ended September 30,1997.
[ ] 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 000-21725
The Translation Group LTD.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware State 23-3382869
- -------------- ----------
(I.R.S. Employer Identification No.)
44 Tanner Street
Haddonfield, NJ 08033
- --------------- -----
(Address of principal executive offices) (Zip Code)
Indicated by check mark whether the registrant (I) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES NO X
---- ----
Applicable Only to Issuers Involved in Bankruptcy
Proceeding During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court. YES NO
--- ----
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Common Stock, .001 Par Value-Issued 2,368,340 shares as of September 30, 1997.
Index
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - September 30, 1997 and
March 31, 1997
Condensed consolidated statements of income - Three months
ended September 30, 1997 and 1996; six months ended September
30, 1997 and 1996
Condensed consolidated statements of cash flows - Six months
ended September 30, 1997 and 1996
Notes to condensed consolidated financial statements -
September 30, 1997
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II. Other Information
Item 1. Legal Proceeding
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports of Form 8-K
Signatures
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 (UNAUDITED) AND MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1997 1997
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<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 3,608,226 $ 3,883,608
Accounts receivable, net of allowance for
doubtful accounts of $25,000 1,252,350 1,197,105
Inventory and other current assets 622,942 521,171
----------- -----------
Total current assets 5,483,518 5,601,884
Property and equipment 1,314,019 1,073,070
Less: accumulated depreciation and amortization (414,369) (331,563)
----------- -----------
Net property and equipment 899,650 741,507
Other assets 305,934 128,475
----------- -----------
TOTAL ASSETS $ 6,689,102 $ 6,471,866
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 327,658 $ 196,847
Notes payable 314,398 510,073
Accrued liabilities 427,744 458,837
Accrued income taxes 51,530 -
Deferred income taxes 278,792 278,792
----------- -----------
Total current liabilities 1,400,122 1,444,549
Stockholders' equity:
Common stock, $.001 par value, 15,000,000
shares authorized, 2,368,340 and 2,318,000
outstanding, respectively 2,368 2,318
Preferred stock, $.001 par value, 1,000,000
authorized, none outstanding
Additional paid-in capital 4,757,824 4,614,852
Retained earnings 528,788 410,147
----------- -----------
Total stockholders' equity 5,288,980 5,027,317
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 6,689,102 $ 6,471,866
=========== ===========
</TABLE>
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
AND THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
3 MONTHS 3 MONTHS 6 MONTHS 6 MONTHS
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 1,413,654 $ 1,916,219 $ 2,905,327 $ 3,705,838
Cost of services 853,440 1,040,997 1,730,766 2,053,499
Depreciation and amortization 44,164 42,874 80,147 81,398
----------- ----------- ----------- -----------
Gross profit 516,050 832,348 1,094,414 1,570,941
Selling, general and administrative expenses 555,192 535,834 1,049,146 997,836
----------- ----------- ----------- -----------
Operating income (39,142) 296,514 45,268 573,105
Non-operating income (expense)
Interest income 48,890 1,324 99,009 1,544
Interest expense (4,522) (3,646) (9,355) (84)
----------- ----------- ----------- -----------
44,368 (2,322) 89,654 1,460
----------- ----------- ----------- -----------
Income before income taxes 5,226 294,192 134,922 574,565
Provision for income taxes 2,720 108,755 52,080 210,296
----------- ----------- ----------- -----------
Net income $ 2,506 $ 185,437 $ 82,842 $ 364,269
----------- ----------- ----------- -----------
Net income per common share outstanding $ 0.001 $ 0.12 $ 0.04 $ 0.23
=========== =========== =========== ===========
Weighted average shares outstanding 2,368,340 1,601,000 2,343,170 1,601,000
=========== =========== =========== ===========
</TABLE>
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
6 MONTHS 6 MONTHS
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
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<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income $ 82,842 $ 364,269
Depreciation and amortization 80,147 81,398
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable (55,245) 97,321
Inventory and other current assets (101,771) -
Other assets (177,460) 7,246
Accounts payable 130,811 (11,790)
Notes payable (195,675)
Accrued liabilities (31,093) (108,679)
Accrued income taxes 51,530 110,100
Deferred income taxes - (56,730)
------------ -----------
Net cash flows provided by (used for) operating activities (215,914) 483,135
CASH FLOWS (USED FOR) INVESTING ACTIVITIES:
Purchase of property and equipment (238,289) (183,442)
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Issuance of common stock 143,022 -
Payments on long term debt (net) (100,000)
Deferred offering costs - (109,390)
------------ -----------
Net cash flows provided by (used for) financing activities 143,022 (209,390)
------------ -----------
Net increase (decrease) in cash and cash equivalents (311,181) 90,303
Effect of exchange rates on cash 35,799
Cash and cash equivalents, beginning of period 3,883,608 668,314
------------ -----------
Cash and cash equivalents, end of period $ 3,608,226 $ 758,617
============ ===========
</TABLE>
Notes to Condensed Consolidated Financial Statements September 30, 1997
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six month periods ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the year ended March 31, 1998. The consolidated balance sheet as at
March 31, 1997 is restated (unaudited) to reflect the acquisition of the Word
House Companies on a pooling of interests basis. Reference is made to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report for the year ended March 31, 1997, Form 10-K.
Note B - Earning Per Share
As of September 30, 1997, there were 2,368,340 shares of common stock
outstanding. For the comparable period in 1996, there was the equivalent of
1,601,000 shares outstanding. For the purpose of computing earnings per share,
average shares outstanding during the three months ended September 30, 1997 was
2,368,340 in comparison to 1,601,000 for the three months ended September 30,
1996. Average shares outstanding during the six months ended September 30, 1997
was 2,343,170 in comparison to 1,601,000 for the six months ended September 30,
1996. In addition, there are outstanding common stock options of 658,000 shares
at a price of $6.00 per share exercisable at the rate of 20% a year from their
date of grant, December 1, 1996 and 2,295,172 warrants to purchase common stock
of the Company at an average price of approximately $6.00 per share. The
computation of earnings per share reflecting the exercise of these options and
warrants are antidilutive.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations - (stated in thousands)
For the three months ended September 30, 1997, consolidated net sales decreased
$502 in comparison to the corresponding period in 1996, from $1,916 to $1,414,
or 26%. Net income declined in comparison to the prior period, from $185 to $3.
Net income per share declined to $.001 from $.12 per share (on a lesser number
of shares). Gross profit decreased from $832 to $516,or 38% (from 43% of sales
to 36% of sales). Selling, general and administrative expenses increased in the
amount of $20, from $536 to $555, or 4%, also increasing from 30% to 39% of
sales respectively. Interest income net of interest expense amounted to $44 for
the current quarter in comparison to interest expense of $2 for the prior
quarter.
Consolidated net sales for the six months ended September 30, 1997 decreased
$801 in comparison to the corresponding period in 1996, from $3,706 to $2,905,
or 22%. Net income declined to $83 from $364 in comparison to the prior period.
Net income per share declined to $.04 from $.25 per share (on a lesser number of
shares). Gross profit decreased by $477, from $1,571 to $1,094, or 30% (from 42%
of sales to 37% of sales). Selling, general and administrative expenses
increased from $998 to $1,049 or 5%, also increasing from 27% to 36% of sales.
Interest income net of interest expense was $90 for the current six months in
comparison to $1 for the same period in the prior year.
Discussion
The decrease in sales of $500,000 for the current three months and $800,000 for
the current six months, as compared to the same periods for the prior year, is
due in part to the rescheduling of deliveries to key customers and delays in
closing of pending orders. As a result, the Company has its largest backlog of
unfilled orders in its history, in excess of $2 million.
The net income for the three month and six month period ended September 30, 1997
in comparison to the same periods of the prior year was negatively impacted by
the following factors: (i) Decrease in billings with relatively fixed costs of
production facilities and selling and administrative overheads, (ii) As a
publicly traded entity, the Company incurred legal, consulting and other fees to
which it previously had not been subject, (iii) The initial coordination with
the Word House Group and the Company's newly opened London office.
The statements presented for the comparative periods are reclassified to agree
with the classifications of the current statements.
Liquidity and Sources of Capital
During the six months ended September 30, 1997, working capital remained at
approximately the same level of $4.1 million. During this period 13,340 warrants
were exercised at $6.00 per share, and 2,000 options were exercised at $6.00 per
share. The Company used cash from operations in the amount of $215,914, invested
$238,289 in equipment and related software, and incurred other changes in cash
as detailed in the accompanying consolidated statement of cash flows.
Part II - Other Information
Item I. Legal Proceeding - none
Item 2. Changes In Securities - none
Item 3. Defaults Upon Senior Securities - n.a.
Item 4. Submission Of Matters To A Vote Of Security Holders - none
Item 5. Other Information - none
Item 6. Exhibits And Reports Of Form 8-K - Form 8-K filed April 17,1997
relative to the proposed acquisition of the Word House Companies
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated November 14, 1997 /s/ Charles D. Cascio, President & CEO
----------------- --------------------------------------
Translation Group Ltd.
(Registrant)
(Name and Title)
Dated November 14, 1997 /s/ Charles D. Cascio, President & CEO
---------------- --------------------------------------
(Name and Title)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANYS
FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,608,226
<SECURITIES> 0
<RECEIVABLES> 1,252,350
<ALLOWANCES> 25,000
<INVENTORY> 171,987
<CURRENT-ASSETS> 5,483,518
<PP&E> 1,314,019
<DEPRECIATION> 414,369
<TOTAL-ASSETS> 6,689,102
<CURRENT-LIABILITIES> 1,400,122
<BONDS> 0
0
0
<COMMON> 2,368
<OTHER-SE> 5,286,612
<TOTAL-LIABILITY-AND-EQUITY> 6,689,102
<SALES> 2,905,327
<TOTAL-REVENUES> 2,905,327
<CGS> 1,730,766
<TOTAL-COSTS> 1,810,913
<OTHER-EXPENSES> 1,049,146
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,355
<INCOME-PRETAX> 134,922
<INCOME-TAX> 52,080
<INCOME-CONTINUING> 82,842
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82,842
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
