<PAGE> 1
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 DECEMBER
31,1997.
[ ] 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 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 2,368,340 SHARES AS OF DECEMBER 31, 1997.
<PAGE> 2
Index
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - December 31, 1997
and March 31, 1997
Condensed consolidated statements of income - Three months
ended December 31, 1997 and 1996; nine months ended
December 31, 1997 and 1996
Condensed consolidated statements of cash flows - Nine
months ended December 31, 1997 and 1996
Notes to condensed consolidated financial statements -
December 31, 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
<PAGE> 3
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 (UNAUDITED) AND MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1997
---- ----
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $3,598,327 $3,883,608
Accounts receivable, net of allowance for
doubtful accounts of $25,000 1,191,067 1,197,105
Inventory 489,262 129,344
Other current assets 279,751 391,827
---------- ----------
Total current assets 5,558,407 5,601,884
Property and equipment 1,429,736 1,073,070
Less: accumulated depreciation and amortization (467,567) (331,563)
---------- ----------
Net property and equipment 962,169 741,507
Other assets 432,376 128,475
---------- ----------
TOTAL ASSETS $6,952,952 $6,471,866
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 291,937 $ 196,847
Notes payable 303,784 510,073
Accrued liabilities and deferred income 685,787 458,837
Accrued income taxes 70,690 --
Deferred income taxes 278,792 278,792
---------- ----------
Total current liabilities 1,630,990 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 561,770 410,147
---------- ----------
Total stockholders' equity 5,321,962 5,027,317
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $6,952,952 $6,471,866
========== ==========
</TABLE>
<PAGE> 4
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED)
AND THE NINE MONTHS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
3 MONTHS 3 MONTHS 9 MONTHS 9 MONTHS
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 1,871,311 $ 1,508,646 $ 4,787,679 $ 5,214,484
Cost of services 1,129,285 827,024 2,973,902 2,880,523
Depreciation and amortization 40,883 47,324 121,030 128,722
------------ ------------ ------------ ------------
Gross Profit 701,163 634,298 1,692,747 2,205,239
Selling, general and
administrative expenses 663,198 633,310 1,651,330 1,681,132
------------ ------------ ------------ ------------
Operating income 37,965 988 41,417 524,107
Non-operating income (expense)
Interest income 55,455 20,052 149,376 21,596
Interest expense (1,384) (16,521) (5,651) (16,605)
------------ ------------ ------------ ------------
54,071 3,531 143,725 4,991
------------ ------------ ------------ ------------
Income before income taxes 92,036 4,519 185,142 529,098
Provision for income taxes 35,720 640 70,940 192,935
------------ ------------ ------------ ------------
Net income $ 56,316 $ 3,879 $ 114,202 $ 336,162
============ ============ ============ ============
Net income per common share
outstanding $ 0.024 $ 0.002 $ 0.05 $ 0.20
============ ============ ============ ============
Weighted average shares
outstanding 2,368,340 1,840,000 2,356,960 1,669,500
============ ============ ============ ============
</TABLE>
<PAGE> 5
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
9 MONTHS 9 MONTHS
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income $ 114,202 $ 517,822
Depreciation and amortization 121,030 128,722
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable 6,038 24,837
Inventory (359,918) -
Other current assets 112,076 57,205
Other assets (303,901) (50,992)
Accounts payable 95,090 43,080
Notes payable (206,289)
Accrued liabilities and deferred income 226,950 (316,655)
Accrued income taxes 70,690 (46,615)
Deferred income taxes - (120,360)
------------ ------------
Net cash flows provided by (used for)
operating activities (124,032) 237,044
CASH FLOWS (USED FOR) INVESTING ACTIVITIES:
Purchase of property and equipment (341,692) (454,680)
CASH FLOWS PROVIDED BY (USED FOR)
FINANCING ACTIVITIES:
Issuance of common stock 143,022 3,598,144
Payments of long term debt (net) - 273,218
Deferred offering costs - 34,540
------------ ------------
Net cash flows provided by (used for)
financing activities 143,022 3,905,902
------------ ------------
Net increase (decrease) in cash and cash
equivalents (322,702) 3,688,266
Effect of exchange rates on cash 37,421
Cash and cash equivalents, beginning of period 3,883,608 668,314
------------ ------------
Cash and cash equivalents, end of period $ 3,598,327 $ 4,356,580
============ ============
</TABLE>
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 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 NINE MONTH PERIODS ENDED
DECEMBER 31, 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 DECEMBER 31, 1997, THERE WERE 2,368,340 SHARES OF COMMON STOCK
OUTSTANDING. FOR THE COMPARABLE PERIOD IN 1996, THERE WAS THE EQUIVALENT OF
1,840,000 SHARES OUTSTANDING. FOR THE PURPOSE OF COMPUTING EARNINGS PER SHARE,
AVERAGE SHARES OUTSTANDING DURING THE THREE MONTHS ENDED DECEMBER 31, 1997 WAS
2,368,340 IN COMPARISON TO 1,840,000 FOR THE THREE MONTHS ENDED DECEMBER 31,
1996. AVERAGE SHARES OUTSTANDING DURING THE NINE MONTHS ENDED DECEMBER 31, 1997
WAS 2,356,960 IN COMPARISON TO 1,669,500 FOR THE NINE MONTHS ENDED DECEMBER 31,
1996. IN ADDITION, THERE ARE OUTSTANDING COMMON STOCK OPTIONS OF 757,000 SHARES
AT A PRICE OF $6.00 PER SHARE EXERCISABLE AT THE RATE OF 20% A YEAR FROM THEIR
DATE OF GRANT AND 2,570,172 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.
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS - (STATED IN THOUSANDS)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997, CONSOLIDATED NET SALES INCREASED
$362 IN COMPARISON TO THE CORRESPONDING PERIOD IN 1996, FROM $1,509 TO $1,871,
OR 24%. NET INCOME INCREASED IN COMPARISON TO THE PRIOR PERIOD, FROM $4 TO $56.
NET INCOME PER SHARE ROSE TO $.024 FROM $.002 PER SHARE (ON A LESSER NUMBER OF
SHARES). GROSS PROFIT INCREASED FROM $634 TO $701, OR 11% (DECREASING FROM 42%
OF SALES TO 37% OF SALES). SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
INCREASED IN THE AMOUNT OF $30, FROM $633 TO $663, OR 5%, AND DECREASING FROM
42% TO 35% OF SALES RESPECTIVELY. INTEREST INCOME NET OF INTEREST EXPENSE
AMOUNTED TO $54 FOR THE CURRENT QUARTER IN COMPARISON TO $3 FOR THE PRIOR
QUARTER.
CONSOLIDATED NET SALES FOR THE NINE MONTHS ENDED DECEMBER 31, 1997 DECREASED
$426 IN COMPARISON TO THE CORRESPONDING PERIOD IN 1996, FROM $5,214 TO 4,788, OR
9%. NET INCOME DECLINED TO $114 FROM $336 IN COMPARISON TO THE PRIOR PERIOD. NET
INCOME PER SHARE DECLINED TO $.05 FROM $.20 PER SHARE (ON A LESSER NUMBER OF
SHARES). GROSS PROFIT DECREASED BY $512, FROM $2,205 TO $1,693, OR 30% (FROM 42%
OF SALES TO 35% OF SALES). SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
DECREASED FROM $1,681 TO $1,651 OR 2%, BUT INCREASED FROM 32% TO 34% OF SALES.
INTEREST INCOME NET OF INTEREST EXPENSE WAS $144 FOR THE CURRENT NINE MONTHS IN
COMPARISON TO $5 FOR THE SAME PERIOD IN THE PRIOR YEAR. (MONIES INVESTED FROM
THE PUBLIC OFFERING IN DECEMBER 1996.)
DISCUSSION
THE DECREASE IN SALES OF $426,000 FOR THE CURRENT NINE 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 $120,000 AND A DECREASE OF $546,000 IN THE SALES OF
FOREIGN SUBSIDIARIES. THIS IS DUE IN PART TO THE INCREASING STRENGTH OF THE
DOLLAR RELATIVE TO FOREIGN CURRENCIES AND TO THE RESCHEDULING OF DELIVERIES TO
KEY CUSTOMERS AND DELAYS IN CLOSING OF PENDING ORDERS. THE COMPANY HAS ITS
LARGEST BACKLOG OF UNFILLED ORDERS IN ITS HISTORY AT DECEMBER 31, 1997.
THE NET INCOME FOR THE THREE MONTH AND NINE MONTH PERIOD ENDED DECEMBER 31, 1997
IN COMPARISON TO THE SAME PERIODS OF THE PRIOR YEAR WAS NEGATIVELY IMPACTED BY
THE FOLLOWING FACTORS: (i) AS A PUBLICLY TRADED ENTITY, THE COMPANY INCURRED
LEGAL, CONSULTING AND OTHER FEES TO WHICH IT PREVIOUSLY HAD NOT BEEN SUBJECT;
(ii) THE INITIAL COORDINATION WITH THE WORD HOUSE GROUP AND THE COMPANY'S NEWLY
OPENED LONDON OFFICE; (iii) APPROXIMATELY $100,000 OF LEGAL, ACCOUNTING, TRAVEL
AND OTHER RELATED EXPENSES IN CONNECTION WITH THE MERGER OF THE WORD HOUSE GROUP
WITH THE TRANSLATION GROUP, LTD. AND (iv) A DECREASE IN BILLINGS WITH RELATIVELY
FIXED COSTS OF PRODUCTION FACILITIES AND SELLING AND ADMINISTRATIVE OVERHEADS.
<PAGE> 8
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 NINE MONTHS ENDED DECEMBER 31, 1997, WORKING CAPITAL DECREASED
APPROXIMATELY $230,000 TO $3.9 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 $124,000, INVESTED
$342,000 IN EQUIPMENT AND RELATED SOFTWARE, AND INCURRED OTHER CHANGES IN CASH
AS DETAILED IN THE ACCOMPANYING CONSOLIDATED STATEMENT OF CASH FLOWS.
<PAGE> 9
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 - FORMS 8-K FILED APRIL 17,1997
AND DECEMBER 11, 1997 RELATIVE TO THE 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 FEBRUARY 17, 1998 /S/ CHARLES D. CASCIO
----------------- ---------------------------------------
PRESIDENT & CEO
THE TRANSLATION GROUP, LTD.
(REGISTRANT)
(NAME AND TITLE)
DATED FEBRUARY 17, 1998 /S/ CHARLES D. CASCIO
----------------- ---------------------------------------
PRESIDENT & CEO
(NAME AND TITLE)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,598,327
<SECURITIES> 0
<RECEIVABLES> 1,191,067
<ALLOWANCES> 25,000
<INVENTORY> 489,262
<CURRENT-ASSETS> 5,558,407
<PP&E> 1,429,736
<DEPRECIATION> 467,567
<TOTAL-ASSETS> 6,952,952
<CURRENT-LIABILITIES> 1,630,990
<BONDS> 0
0
0
<COMMON> 2,368
<OTHER-SE> 5,319,594
<TOTAL-LIABILITY-AND-EQUITY> 6,952,952
<SALES> 4,787,679
<TOTAL-REVENUES> 4,787,679
<CGS> 2,973,902
<TOTAL-COSTS> 3,094,932
<OTHER-EXPENSES> 1,651,330
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,651
<INCOME-PRETAX> 185,142
<INCOME-TAX> 70,940
<INCOME-CONTINUING> 114,202
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 114,202
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
