United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Period of Nine Months Ended December 31, 1996.
[ ] 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 0-21725
The Translation Group, LTD.
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(Exact name of registrant as specified in its charter)
Delaware 23-3382869
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
44 Tanner Street
Haddonfield. NJ 08033
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(Address of principal (Zip Code)
executive of offices)
(609)795-8669
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(Registrant's telephone number, including area code)
7703 Maple Avenue, Pennsauken NJ 08109
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(Former name, former address and former fiscal year,
if changed since last report)
Indicated by check mark whether the registrant (1) 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
Proceedings 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 X
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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 1,943,000 shares as of December 31, 1996
INDEX
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--December 31, 1996 and March 31,
1996
Condensed consolidated statements of income--Three months ended December
31, 1996 and 1995; nine months ended December 31, 1996 and 1995
Condensed consolidated statements of cash flows--Nine months ended
December 31, 1996 and 1995
Notes to condensed consolidated financial statements--December 31, 1996
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 SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 (UNAUDITED) AND MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1996
---- ----
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 4,132,279 $ 530,340
Accounts receivable, net of allowance for
doubtful accounts of $20,000 639,564 642,481
Deferred offering costs 34,540
---------- ----------
Total current assets 4,771,843 1,207,361
Property and equipment 560,726 362,178
Less: accumulated depreciation end amortization (258,066) (189,466)
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Net property and equipment 302,660 172,712
Other assets 109,751 58,759
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TOTAL ASSETS $ 5,184,254 $ 1,438,832
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 106,870 $ 55,834
Accrued liabilities 187,109 26,000
Accrued income taxes 68,385 115,000
Deferred income taxes 113,034 233,394
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Total current liabilities 475,398 430,228
Stockholders equity:
Common stock, $.001 par value, 15,000,000
shares authorized, 1,943,000 outstanding
and 3,782,000 Outstanding, respectively 1,943 3,782
Preferred stock, $.001 par value, 1,000,000
authorized, none outstanding
Additional paid-in capital 4,062,851 462,868
Retained earnings 644,062 541,954
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Total stockholders' equity 4,708,856 1,008,604
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,184,254 $ 1,438,832
========== ==========
</TABLE>
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED
DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND THE NINE MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
3 MONTHS 3 MONTHS 9 MONTHS 9 MONTHS
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 717,815 $ 668,551 $ 2,365,372 $ 1,906,552
Cost of services provided 510,766 392,572 1,583,268 1,066,163
Depreciation and amortization 28,528 18,600 68,600 55,800
--------- --------- ----------- ----------
Gross profit 178,521 257,379 713,504 784,589
Selling, general and
administration expense 225,609 136,548 571,716 411,611
--------- --------- ----------- ----------
Operating income (47,088) 120,831 141,788 372,978
--------- --------- ----------- ----------
Non-operating income (expense)
Interest income (expense) 20,052 21,596
--------- --------- ----------- ----------
Income before income taxes (27,036) 120,831 163,384 372,978
Provision for income taxes (10,720) 48,260 61,276 139,290
--------- --------- ----------- ----------
Net income $ (16,316) $ 72,571 $ 102,108 $ 233,688
========= ========= =========== ==========
Net income per common share
outstanding $ (0.01) $ 0.10 $ 0.08 $ 0.31
========= ========= =========== ==========
Weighted average shares
outstanding 1,465,000 755,000 1,294,500 755,000
========= ========= =========== ==========
</TABLE>
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
9 MONTHS 9 MONTHS
DECEMBER 31, DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income $ 102,108 $ 233,688
Depreciation and amortization 68,600 55,800
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable 2,917 (315,632)
Other assets (50,992) (23,891)
Accounts payable 51,036 151,193
Accrued liabilities 161,109 (714)
Accrued income taxes (46,615) 4,937
Deferred income taxes (120,360) 131,962
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Net cash flows provided by operating activities (2,905) (52,145)
CASH FLOWS PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
Purchase of property and equipment (198,548) (172,271)
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Issuance of common stock 3,598,144
Deferred offering costs 34,540
Payments under line of credit (40,000)
Net borrowings (payments) on long-term debt 3,309
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Net cash flows provided by (used in) financing activities 3,632,684 (36,691)
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Net increase in cash and cash equivalents 3,601,939 28,381
Cash and cash equivalents, beginning of period 530,340 2,238
--------- ---------
Cash and cash equivalents, end of period $4,132,279 $ 30,619
========= =========
</TABLE>
Notes to Condensed Consolidated Financial Statements
December 31, 1996 (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 nine month periods ended
December 31, 1996 are not necessarily indicative of the results that may be
expected for the year ended March 31, 1997. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Registration Statement of the Company that became effective December 6, 1996.
Note B--Earnings Per Share
As of April 1, 1996, there were 1,891,000 shares of outstanding common stock of
which 665,000 shares were subsequently returned by shareholders as a condition
of the underwriting. As of December 6, 1996 the Company sold 705,000 shares of
its common stock pursuant to the underwriting and issued 12,000 shares in
payment of debt. For the comparable periods in 1995, the Bureau of Translation
Services, Inc.(BTS) had the equivalent of 755,000 shares outstanding, based on
its merger agreement of January 17, 1996 with The Translation Group Ltd.(TTGL),
who shareholders received 895,000 shares in such merger.
There are outstanding: common stock options to employees of 385,000 shares at a
price of $6.00 per share exercisable over the next five years at the rate of 20%
per year, 2,140,000 warrants to purchase common stock of the Company at an
average price of approximately $6.00 per share; 40,000 warrants to purchase
common stock of the Company at a price of $1.50 per share and an option to
purchase 60,000 shares of common stock and 160,000 warrants at the price of
$7.80 per share exercisable until 1999.
The computation of earnings per share reflecting the above 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 nine months ended December 31, 1996 net sales increased 24%
over the corresponding period in 1995, from $ 1,906.6 to $ 2,365.4. However, net
income declined by 62% in comparison to the prior period, from $232.2 to $88.7.
Gross profit decreased from $784.5 (41% of sales) to $713.5 (30% of sales), or
9%. Selling, general and administrative expenses, (the current period includes
approximately $100,000 of expenses of the IPO as described below) increased in
the amount of $181.3, from $412.1 to $593.4, or 44%, from 22% to 25% of sales
respectively. Interest income amounted to $21.6 (there was no net interest in
the prior period).
For the three months ended December 31, net sales increased 7.5% in
comparison to the corresponding period in 1995, from $668.6 to $717.8. Net
income declined by $88.9 in comparison to the prior period, from a profit of
$72.5 to a loss of $16.3. Cost of sales increased from $411.2 to $539.3 or 31%;
selling, general and administrative expenses increased in the amount of $89.1
from $136.5, or 65%, and, as a percentage of sales from 20% to 31%. Interest
income increased by $20.1.
Discussion
The net income for both the nine months and the three months periods
that ended December 31, 1996 were negatively impacted by the following factors:
(i) The Company's initial public offering (IPO) became effective in December
1996. The outside costs of underwriting, legal, accounting, blue sky,
printing and other expenses of the underwriting incurred during the
period were charged to the proceeds received. Internal expenses such as
officers' salaries and staff time were charged to operations. The chief
executive officer (CEO) devoted full time during this period to
negotiations with underwriters, preparation of the registration
statement, meetings with various professionals (legal and accounting),
printers, etc. The CEO's salary and related expenses of approximately
$100,000 are included in selling, general and administrative expenses.
(ii) The Company was unable to utilize machine translation as effectively as
in the prior periods, since it expanded its base of customers, topics and
languages. Without repeat business, (by customer, topic and language)
additional lead time is required to effect efficiency in the use of
machine translation.
(iii) Revenues from two of the company's principal customers seasonally
declined for the third quarter of 1996; new orders are currently in the
pipeline.
(iv) The Company expanded its project management and customer communication
facilities in comparison to a year ago, approximately doubling its
computers and related operating systems and software; this expansion
involved additional hiring and training costs.
(v) The Company added to its sales and sales support personnel to promote
regular business as well as sales under a licenses agreement.
The statements presented for the comparative periods are reclassified to agree
with the classifications of the current statements.
Liquidity and Sources of Capital
In December, 1996, the Company received net proceeds after all costs of
$3,598,144 from the sale of 705,000 shares and 1,840,000 warrants and issued
12,000 shares in payment of indebtedness of approximately $50,000. The Company
generated cash from operations for the nine months of $170,708 and invested
$198,548 in equipment and related software. Accounts receivable and other assets
net of accounts payable and other liabilities decreased by $2,905. Accordingly,
cash and equivalents increased by $3,601,939, from $530,340 as of April 1, 1996
to $4,132,279 as of December 31, 1996.
PART II. OTHER INFORMATION
Item 1. 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
There were no reports filed on Form 8-K
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.
The Translation Group. LTD.
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(Registrant)
Date February 1997 /s/
- ------------------------- -----------------------------------
(Name and Title)
Date February 1997 /s/
- ------------------------- -----------------------------------
(Name and Title)
