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 June 30, 1998.
[ ] 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
332-C Haddon Avenue (I.R.S. Employer Identification No.)
Westmont, NJ 08108
(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 X NO _
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 2,278,340 shares as of June 30, 1998.
<PAGE>
Index
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - June 30, 1998 and March 31, 1998
Condensed consolidated statements of income - Three months ended June 30,
1998 and 1997.
Condensed consolidated statements of cash flows - Three months ended June
30,1998 and 1997.
Notes to condensed consolidated financial statements - June 30, 1998
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
<PAGE>
The Translation Group, Ltd.
and Subsidiaries
Consolidated Balance Sheets
June 30, 1998 (unaudited) and March 31, 1998 (unaudited)
<TABLE>
June 30, March 31,
1998 1998
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 1,447,435 $ 1,297,039
Investment in US Government obligations, at cost 2,000,401 2,000,573
Accounts receivable, net of allowance for
doubtful accounts of $80,000 1,057,635 1,184,040
Work in process 791,626 737,697
Other current assets 247,540 144,375
Total current assets 5,544,637 5,363,724
Property and equipment, net of accumulated depreciation and amortization of
$573,695 and $514,998, respectively 908,940 861,748
Excess of purchase price over fair value of net assets acquired, net of
accumulated amortization of $96,884 and $72,663, respectively 1,356,378 1,380,599
Certificate of deposit, pledged 106,540 100,000
Loans and receivables from officers 205,532 205,532
Other assets 155,508 171,685
Deferred income taxes 97,700 97,700
TOTAL ASSETS $ 8,375,235 $ 8,180,988
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 276,814 $ 342,803
Notes payable 180,130
Current maturities of long-term debt 75,000 75,000
Accrued liabilities 449,586 751,718
Deferred income 53,332 67,948
Accrued income taxes 162,167 31,954
Deferred income taxes 345,074 315,872
Total current liabilities 1,542,103 1,585,295
Long-term debt, less current maturities 56,250 75,000
TOTAL LIABILITIES 1,598,353 1,660,295
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 1,000,000 authorized, no shares issued
and outstanding - -
Common stock, $.001 par value, 15,000,000 shares authorized, 2,278,340
shares outstanding and to be issued and 1,991,340 outstanding, respectively 2,278 2,278
Additional paid-in capital 6,051,985 6,051,985
Unearned portion of compensatory warrants (180,000) (225,000)
Retained earnings 889,947 681,661
Foreign currency translation adjustment 12,672 9,769
Total stockholders' equity 6,776,882 6,520,693
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 8,375,235 $ 8,180,988
</TABLE>
<PAGE>
The Translation Group, Ltd.
and Subsidiaries
Consolidated Statements of Income For the three months
ended June 30, 1998 and 1997 (unaudited)
<TABLE>
3 months June 30,3 months June 30,
1998 1997
<S> <C> <C>
Revenue $ 2,042,783 $ 866,120
Cost of revenue 1,082,599 544,614
Gross profit 960,184 321,506
Cost and expenses:
Selling, general and administrative 560,177 282,648
Amortization of compensatory warrants 45,000
Amortization of excess of purchase price over fair
value of net assets acquired 24,221 -
Total 629,398 282,648
Income before other income (expense) 330,786 38,858
Other income (expense):
Interest income 51,961 49,745
Interest expense (14,761) (184)
37,200 49,561
Income before provision for income taxes 367,986 88,419
Provision for income taxes 159,700 34,480
Net income $ 208,286 $ 53,939
Net income per common share outstanding (basic and diluted) $ 0.09 $ 0.03
Weighted average shares outstanding 2,278,340 1,961,500
</TABLE>
<PAGE>
The Translation Group, Ltd.
and Subsidiaries
Consolidated Statements of Cash Flow For the three months
ended June 30, 1998 and 1997 (unaudited)
<TABLE>
3 months June 30, 3 months June 30,
1998 1997
<S> <C> <C>
Cash flows provided by (used for) operating activities:
Net income $ 208,286 $ 53,939
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
Depreciation and amortization 140,500 14,064
Deposits 3,595
Deferred income taxes 29,202
Changes in operating assets and liabilities:
Accounts receivable 126,405 (91,940)
Work in process (53,929) (27,216)
Other current assets (103,165) (5,282)
Accounts payable (65,989) 68,654
Notes payable 180,130 (54,722)
Accrued liabilities and deferred income (316,748) 44,242
Accrued income taxes 130,213 49,340
Net cash provided by (used for) operating activities 278,500 51,079
Cash flows provided by (used for) investing activities:
Investments in US Government obligations 172
Purchase of property and equipment (105,889) (107,307)
Investment in certificate of deposit (6,540) -
Net cash provided by (used for) investing activities (112,257) (107,307)
Cash flows provided by financing activities:
Net proceeds from issuance of common stock 79,440
Payments on long-term debt (18,750) (150,000)
Net cash flows provided by (used for) financing activities (18,750) (70,560)
Foreign currency translation adjustment 2,903
Net increase (decrease) in cash and cash equivalents 150,396 (126,788)
Cash and cash equivalents, beginning of period 1,297,039 658,196
Cash and cash equivalents, end of period $ 1,447,435 $ 531,408
</TABLE>
<PAGE>
Notes to Condensed Consolidated Financial Statements June 30, 1998 (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 month period ended June 30, 1998
are not necessarily indicative of the results that may be expected for the year
ended March 31, 1999. Effective June 30, 1997, and as later amended, the Company
acquired all the issued and outstanding common stock of the companies that
comprise the Word House Group (Word House) in exchange for 185,000 of its common
shares and 200,000 additional common shares contingent on future earnings
levels, of which 100,000 shares were issuable as of March 31, 1998. Reference is
made to the consolidated financial statements and footnotes thereto included in
the Company's Annual Report for the year ended March 31, 1998, Form 10-K.
Note B - Earning Per Share
As of June 30, 1998, there were 2,278,340 shares of common stock outstanding.
For the comparable period in 1997, there were the equivalent of 1,991,340 shares
outstanding. For the purpose of computing earnings per share, average shares
outstanding during the three months ended June 30, 1998 was 2,278,340 in
comparison to 1,961,500 for the three months ended June 30, 1997. In addition,
there are outstanding common stock options of 1,197,000 shares at an average
price of approximately $5.50 per share and 2,186,660 warrants to purchase common
stock of the Company at an average price of approximately $6.00 per share. There
is no dilution effect on the computation of earnings per share reflecting the
exercise of these options and warrants.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations - (stated in thousands)
For the three months ended June 30, 1998, consolidated net sales increased
$1,177 in comparison to the corresponding period in 1996, from $866 to $2,043.
Net income increased in comparison to the prior period, from $54 to $208. Net
income per share rose to $.09 from $.03 per share. Gross profit increased from
$322 to $960, (increasing from 37% of sales to 47% of sales). Selling, general
and administrative expenses increased from $283 to $560, decreasing from 33% to
27% of sales respectively. Interest income net of interest expense amounted to
$37 for the current quarter in comparison to $50 for the prior quarter.
Discussion
The increase in sales of $1,177,000 for the current three months as compared to
the same period for the prior year, consists of an increase in sales of the
domestic subsidiary in the amount of $770,000 and the net sales in the amount of
$407,000 of the acquired foreign subsidiaries. The increase in sales of the
domestic subsidiary was due to the fact that the Company was able to utilize
software based translation tools effectively to meet customers' turnaround
requirements and still maintain quality control.
The net income for the three month period ended June 30, 1998 in comparison to
the same period of the prior year was positively impacted by the fact that the
increase in sales, as previously mentioned, was greater than the increase in the
relatively fixed costs of production facilities and selling and administrative
overheads.
Liquidity and Sources of Capital
During the three months ended December 31, 1997, working capital increased
approximately $230,000 from $3.8 million to $4 million. The Company generated
cash from operations in the amount of $279,000, invested $106,000 in equipment
and related software, and incurred other changes in cash as detailed in the
accompanying consolidated statement of cash flows.
<PAGE>
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 - none
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 August 14, 1998 /s/ Charles D. Cascio
President & CEO
The Translation Group, LTD.
(Registrant)
(Name and Title)
Dated August 14, 1998 /s/ Charles D. Cascio
President & CEO
(Name and Title)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF THE TRANSLATION GROUP, LTD. FOR THE THREE MONTHS ENDED JUNE 30,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,447,435
<SECURITIES> 2,000,401
<RECEIVABLES> 1,137,635
<ALLOWANCES> 80,000
<INVENTORY> 0
<CURRENT-ASSETS> 5,544,637
<PP&E> 1,482,635
<DEPRECIATION> 573,695
<TOTAL-ASSETS> 8,375,235
<CURRENT-LIABILITIES> 1,542,103
<BONDS> 56,250
0
0
<COMMON> 2,278
<OTHER-SE> 6,774,604
<TOTAL-LIABILITY-AND-EQUITY> 8,375,235
<SALES> 2,042,783
<TOTAL-REVENUES> 2,042,783
<CGS> 1,082,599
<TOTAL-COSTS> 1,082,599
<OTHER-EXPENSES> 629,398
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,761
<INCOME-PRETAX> 367,986
<INCOME-TAX> 159,700
<INCOME-CONTINUING> 208,286
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 208,286
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
