================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported May 28, 1999
------------
The Translation Group, Ltd.
-------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 000-21725 23-3382869
- --------------------------- ------------ -------------------
State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
30 Washington Avenue, Haddonfield, NJ 08033
-----------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(609) 795-8669
--------------
(Registrant's Telephone Number, Including Area Code
(Former Name, Former Address, and Former Fiscal Year,
If Changed Since Last Report)
================================================================================
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereto duly authorized.
Date: August 12, 1999
THE TRANSLATION GROUP, LTD.
By: /s/ Charles D. Cascio
-------------------------------
Charles D. Cascio
President and CEO
<PAGE>
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) May 28, 1999
------------
The Translation Group, Ltd.
-------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 000-21725 23-3382869
- --------------------------- ------------ -------------------
State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
30 Washington Avenue, Haddonfield, NJ 08033
-----------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (609) 795-8669
--------------
Item 2. Acquisition or Disposition of Assets. - As previously reported on
May 28,1999
Item 3-6. Not Applicable
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired. This amendment
provides audited Financial Statements of Planet Access Networks,
Inc., a NJ corporation.
("Pan")Consisting of:
I. Independent Auditor's Report:
II. Balance sheet as of December 31, 1998
III. Statements of Income for the years ended December 31, 1998 and 1997
IV. Statements of Stockholders' equity for the years ended December 31, 1998 and
1997
V. Statements of cash flows for the years ended December 31, 1998 and 1997 VI.
Notes to Financial Statements.
(b) Pro Forma Financial Information.
This amendment also provides unaudited Proforma condensed consolidated
information.
I. Unaudited proforma Condensed Consolidated Balance Sheet.
II. Unaudited proforma Condensed Consolidated Statement of Operations
The above audited fiancial statements and unaudited proforma condensed
consolidated financial information were not included in the Form 8-K filed by
the registrant on May 28, 1999 because the information was not determinable at
such time.
All capitalized terms used herein but not otherwise defined shall have the
respective meanings given them in the Form 8-K filed by the registrant on May
28, 1999
(c) Exhibits
None
<PAGE>
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 hereunto duly authorized.
The Translation Group, Ltd.
------------------------------------------
(Registrant)
Date August 12, 1999 By: /s/ Charles D. Cascio
---------------- -------------------------------------
Charles D. Cascio,
President and Chief Executive Officer
<PAGE>
PLANET ACCESS NETWORKS, INC.
FINANCIAL STATEMENTS
TABLE OF CONTENTS
-----------------
I. Independent Auditors' Report:
II. Balance Sheet as of December 31, 1998
III. Statements of Income for the years ended December 31, 1998 and 1997
IV. Statements of Stockholders' Equity for the years ended December 31, 1998
and 1997
V. Statements of Cash Flows for the years ended December 31, 1998 and 1997
VI. Notes to Financial Statements.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Planet Access Networks, Inc.
We have audited the balance sheet of Planet Access Networks, Inc. as of December
31, 1998 and the related statements of income, changes in stockholders' equity
and cash flows for each of the two years in the period then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Planet Access Networks, Inc. at
December 31, 1998, and the results of its operations and its cash flows for each
of the two years in the period then ended in conformity with generally accepted
accounting principles.
WISS & COMPANY, LLP
Livingston, New Jersey
June 11, 1999
<PAGE>
Planet Access Networks, Inc.
Balance Sheet
As of December 31, 1998
<TABLE>
<CAPTION>
December 31,
1998
----
<S> <C>
ASSETS
Current assets:
Cash $ 2,196
Accounts receivable, net of allowance for doubtful accounts of $28,687 273,941
Other current assets 1,000
-----------------
Total current assets 277,137
Property and equipment, net of accumulated depreciation 366,782
Net assets of discontinued operations 16,839
TOTAL ASSETS $ 660,758
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 79,678
Notes payable, bank 67,900
Current portion Obligations under capitalized leases 23,282
Income taxes payable 1,000
Deferred income taxes 78,000
Accrued liabilities 95,287
Deferred income 46,477
-----------------
Total current liabilities 391,624
-----------------
Obligations under capitalized leases less current portion 9,428
-----------------
Deferred income taxes 32,300
-----------------
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, 1,000 shares authorized, issued and outstanding 6,487
Retained earnings 220,919
-----------------
Total stockholders' equity 227,406
-----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 660,758
=================
See Auditors' Report and Accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
PLANET ACCESS NETWORKS, INC.
Statements of Income
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
Revenue $ 1,855,063 $ 1,416,805
Cost of revenue 1,240,311 889,908
----------------- ----------------
Gross profit 614,752 526,897
Selling, general and administrative 516,365 396,431
----------------- ----------------
Operating income 98,387 130,466
Interest expense 16,179 37,821
----------------- ----------------
Income from continuing operations before provision for income taxes 82,208 92,645
Provision for income taxes 7,300 24,600
----------------- ----------------
Income from continuing operations 74,908 68,045
Discontinued operations:
Loss from operations of the internet service provider division
to be disposed of (net of income tax benefit of $3,800 in 1998 24,000 18,800
and $5,200 in 1997) ----------------- -----------------
Net income $ 50,908 $ 49,245
================== =================
See Auditors' Report and Accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
PLANET ACCESS NETWORKS, INC.
Statements of Stockholders' Equity
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
TOTAL
COMMON COMMON RETAINED STOCKHOLDERS'
SHARES STOCK EARNINGS EQUITY
------ ------- -------- -------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 1,000 $ 6,487 $ 120,766 $ 127,253
Net Income - - 49,245 49,245
----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1997 1,000 6,487 170,011 176,498
Net Income - - 50,908 50,908
----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1998 1,000 $ 6,487 $ 220,919 $ 227,406
=========== =========== ========== ============
See Auditors' Report and Accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
PLANET ACCESS NETWORKS, INC.
Statements of Cash Flows
for the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net Income $ 50,908 $ 49,245
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Loss from discontinued operations 24,000 18,800
Deferred income taxes 1,800 22,000
Depreciation 116,475 64,144
Provision for bad debt 28,687 16,754
Changes in operating assets and liabilities:
Accounts receivable 65,605 (260,519)
Other current assets 1,050
Accounts payable (12,569) 74,747
Accrued liabilities 43,229 52,058
Deferred income 11,459 35,018
Income taxes payable - 1,000
------- -----
Net cash provided by (used in) continuing operations 329,594 74,297
Net cash provided by (used in) discontinued operations (41,349) 25,578
-------- ------
288,245 99,875
------- --------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchase of property and equipment (247,923) (110,623)
--------- ---------
Net cash provided by (used in) investing activities (247,923) (110,623)
--------- ---------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Net proceeds from notes payable, banks 47,900 20,000
Payments on lease obligations (17,116) (6,708)
Payments on lease obligations, discontinued operations (32,710) (18,999)
Loans and advances to officers (36,200) 15,200
-------- ------
Net cash provided by (used in) financing activities (38,126) 9,493
-------- -----
Net increase (decrease) in cash 2,196 (1,255)
Cash, beginning of year - 1,255
----- -----
Cash , end of year $ 2,196 -
=========== =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During the years ended December 31, 1998 and 1997, the Company entered into
several capital lease obligations in the amounts of $25,000 and $30,000,
respectively for continuing operations and $122,000 in 1997 discontinued
operations
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 16,970 $ 36,815
========= =========
Income taxes $ 6 $ 912
========= =========
See Auditors' Report and Accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
Planet Access Networks, Inc.
Notes to Financial Statements
NOTE 1-THE COMPANY
Planet Access Networks, Inc. (the "Company") is a digital communications
solutions provider. The Company provides an integrated service offering
consisting of strategic consulting, design of information architectures and
user-interfaces and creation and customization of software necessary to
implement our digital communications solutions. The Company primarily use
Internet-based technologies to create digital communications solutions for the
World Wide Web.
NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue is accounted for under the percentage of completion method of
accounting, whereby sales and costs are recognized as work on contracts
progresses. Changes in estimates for revenue, costs and profits are recognized
in the period in which they are determinable. Work in progress represents the
excess of revenue recognized for financial reporting purposes over amounts
contractually permitted to be billed to customers. At December 31, 1998 there
was no work in process. Deferred revenue represents excess of amounts billed
over revenue recognized for financial reporting purposes. Invoices are rendered
based upon terms of the contract.
CAPITALIZED COMPUTER SOFTWARE COSTS
Generally accepted accounting principles requires companies to capitalize and
amortize certain costs associated with developing software for internal use.
There are three stages: the preliminary project stage; the application
development stage; and the post-implementation/operation stage. After the
preliminary project stage is completed and management has committed to funding a
software project whose sucess is probable, such costs are capitalized. Once the
software is placed into service, the capitalized costs are amortized over the
period of expected benefit in a systematic and rational manner. The amount
capitalized in 1998 was approximently $148,000.
CONCENTRATION OF CREDIT RISK
The Company grants unsecured credit to virtually all of its customers, with no
individual customer comprising a concentrated risk. Management believes that
credit risk associated with accounts receivable is limited due to the Company's
long standing relationships with the majority of its customers.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost net of depreciation and amortization.
Depreciation and amortization are computed using straight-line and accelerated
methods over the estimated useful lives of the assets in place.
INCOME TAXES
The Company has elected under the Internal Revenue Code to be taxed as an S
Corporation beginning with the year ended December 31, 1997. Under these
provisions, the Company does not pay federal corporate income taxes on its
taxable income (other than "built -in gains" taxes). Instead, the stockholders
are liable for individual federal income taxes on their proportionate shares of
the Company's taxable income. The Company is also liable for New Jersey
corporate income taxes on its taxable income. The Company has also elected to be
taxed using the cash basis of accounting.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from these estimates.
FINANCIAL INSTRUMENTS
Financial instruments include cash, accounts receivable, accounts payable, bank
notes payable and accrued expenses. The amounts reported for financial
instruments are considered to be reasonable approximations of their fair values,
based on market and other information available to management.
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS
In March 1998, the accounting Standards Executive Committee issued Statement of
Position 98-1 ("SOP 98-1"), Accounting for the cost of Computer Software
Developed or Obtained for Internal Use. SOP 98-1 requires all costs related to
the development of internal use software other then those incurred during the
application development stage to be expensed as incurred. Costs incurred during
the application development stage are required to be capitalized and amortized
over the estimated useful life of the software. SOP 98-1 is effective for fiscal
years ending December 31, 1999
In addition to the aforementioned pronouncements, SFAS 133, Accounting for
Derivative Instruments and Hedging Activities was issued in June 1998. SFAS 137
defers the effective date for implementation of SFAS 133 to all fiscal quarters
of all fiscal years beginning after June 15, 2000.
The Company does not expect that any of the aforementioned pronouncements will
have a significant effect on its financial statements.
NOTE 3-PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
December 31, 1998 Useful Life (Years)
----------------- -------------------
Computer Hardware $265,108 5
Computer Software 194,809 5
Leased Equipment 55,000 5
Office Equipment 21,380 5
Furniture and Fixtures 12,004 5
-------
Total 548,301
Less: accumulated depreciation 181,519
-------
Net property and equipment $366,782
========
For the years ended December 31, 1998 and 1997, depreciation expenses were
$116,475 and $64,144, respectively.
NOTE 4- NOTES PAYABLE
The original bank loan from PNC Bank for financing of equipment in the amount of
$27,000 is payable monthly, beginning August 1998, in the principal amount of
$750 plus interest at the rate of 9.75% per anum. The loan is collateralized by
the equipment. The balance of the note payable at December 31, 1998 is $23,250.
The Company is also indebted to PNC Bank in the amount of $44,650 at December
31, 1998 which represents the amount outstanding on a line of credit in the
amount of $100,000 expiring July 16, 1999. Both of these loans were paid in full
in May 1999.
NOTE 5-INCOME TAXES
A summary of current and deferred state income taxes from continuing operations
as included in the statement of operations is as follows:
Year Ended
December 31,
----------------------
1998 1997
---- ----
Current $5,500 $ 2,600
Deferred $1,800 $22,000
------ -------
$7,300 $24,600
====== =======
<PAGE>
The significant components of the Company's deferred tax liability at December
31, 1998 are summarized as follows:
Cumulative difference due to the use of
the cash basis of accounting for income
tax reporting purposes. $53,600
Excess of financial statement basis of
property And equipment over tax basis 56,900
-------
Net deferred tax liability $ 110,500
=========
NOTE 6-COMMITMENTS AND CONTINGENCIES
A. Rent
The Company is currently paying rent on a month to month basis in the amount of
$2,700 per month as its lease expired on June 30, 1998 and was not renewed. Rent
expenses for the years ended December 31, 1998 and 1997 were $32,400 each year.
B. Capitalized Leases
Following is a summary of property held under capital leases:
Data equipment $ 55,000
Accumulated Depreciation 17,000
------
$ 38,000
--------
Minimum future lease payments under capital leases as of December 31 for each of
the next five years and in the aggregate are:
Year Ended December 31
1999 $ 26,014
2000 9,676
-----
Total minimum lease payments 35,690
Less amount representing interest 2,980
-----
Present value of net minimum lease payments 32,710
Less: current portion 23,282
------
$ 9,428
=========
Interest rates on capitalized leases vary from 8% to 21.7% and are imputed based
on the lower of the Company's incremental borrowing rate at the inception of
each lease or the lessor's implicit rate of return.
<PAGE>
NOTE 7-DISCONTINUED OPERATIONS
On December 31, 1998, the Company adopted a plan to discontinue its internet
service provider division ("ISP"). In accordance with the disposal, the Company
signed a letter of intent with IBS Interactive ("IBS") for the sale of the
division. On May 7, 1999, immediately prior to the closing of the sale of the
division to IBS, the Company distributed the net assets of the division to its
individual shareholders. The individual shareholders then sold the assets of the
division, including property and equipment, accounts receivable, net of accounts
payable to IBS for $630,000. The result of this transfer of net assets and the
corresponding sale to IBS was an approximate $573,000 gain to the Company during
1999.
Operating results from the discontinued ISP segment for the years ended December
31, 1998 and 1997 have been included in discontinued operations and are as
follows:
December 31
-----------
1998 1997
---- ----
Sales Revenue $742,000 $651,000
======== ========
Cost of Sales $503,400 $392,000
======== ========
Selling, General and Administrative $266,400 $283,000
======== ========
Income Tax Benefit $(3,800) $(5,200)
======== ========
Net Loss Discontinued Operations $24,000 $ 18,800
======== ========
Assets and liabilities of the ISP division, included in net assets of
discontinued operations at December 31, 1998 are as follows:
Accounts Receivable $15,000
Leased Equipment 88,000
Accounts Payable (17,000)
Capital Lease Obligations (69,000)
--------
Net assets discontinued operations $17,000
=========
NOTE 8 -SUBSEQUENT EVENTS
As of May 1, 1999, the Company sold its internet and website development and
management services portion of its business to The Translation Group ("TGL") for
416,668 shares of its stock and cash in the amount of $900,000 to be paid on
September 15, 1999. The purchase is secured by the seller's shares: the officers
of the seller received four-year employment contracts that include incentive
stock options of TGL. TGL agreed further:
I. To secure funding by September 15, 1999, in the minimum amount of
$4,000,000.
II. That each of the four sellers has the right to require the purchaser to
repurchase at $7.00 per share all or part of the 416,668 shares issued
under the agreement if, on September 15, 2000, certain conditions are
not met, including the selling price of TGL's common shares is at least
$10.00 per share.
III. To establish a $250,000 line of credit for the Company, to be
considered as liquidated damages in the event TGL fails to implement
its obligations under the agreement.
The purchase price will be allocated to the underlying fair value of the assets
acquired, and the balance to excess of purchase price over fair value of net
assets acquired.
As a result of the above transaction the Company was required to terminate it's
status as an S - corporation for federal income tax purposes. Accordingly,
proforma provisions for federal income taxes and the resulting proforma net
income are as follows:
December 31,
------------
1998 1997
---- ----
Proforma provision for federal
income taxes at 34% $20,000 $25,000
======= =======
Proforma Net Income $31,000 $24,000
======= =======
<PAGE>
ITEM 7b The Translation Group, Ltd
and Subsidiaries
Proforma Condensed
Consolidated Balance Sheet
(Unaudited)
March 31, 1999
Amounts in Thousands
<TABLE>
<CAPTION>
PROFORMA
PAN TGL Adjustments Reference Consolidated
--- --- ----------- --------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $2 $1,896 - $1,898
Accounts receivable (net) 274 857 - 1,131
Work in process - 391 - 391
Certificate of deposit, pledged - 107 - 107
Other current assets 1 350 - 351
-- ---- -- ---
Total current assets 277 3,601 - 3,878
Property and equipment (net) 367 1,008 - 1,375
Investments & Excess of purchase price over fair
value of net assets acquired (net) - 1,250 3,192 a,b,c,f 4,442
Loan receivable from officer - 149 - 149
Other assets 17 128 - 145
--- ---- ----- ---
TOTAL ASSETS 661 6,136 3,192 9,989
==== ====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 80 452 - 532
Notes payable, banks 68 197 - 265
Current maturities of long-term obligations 23 123 874 a 1,020
Accrued liabilities 95 445 - 540
Deferred income 46 245 - 291
Inocome Taxes Payable 1 - - 1
Deferred Income Taxes 78 - 29 f 107
---- ---- ---- ----
Total current liabilities 391 1,462 903 2,756
---- ------ ---- -----
Long-term obligations, less current maturities 10 178 - 188
Deferred Income Taxes 32 - - 32
TOTAL LIABILITIES 433 1,640 903 2,976
---- ------ ---- -----
Commitments and contingencies
Common Stock redeemable ( under certain condition) at the
option of purchasers, 416,668 shares issued and outstanding - - 2,517 a,b 2,517
-- -- ------ -----
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 6 2 (6) c 2
Additional paid-in capital - 6,052 - 6,052
Unearned portion of compensatory warrants - (45) - (45)
Retained earnings (deficit) 222 (1,467) (222) c (1,467)
Common stock in treasury, 8,000 shares (68) - (68)
Foreign currency translation adjustment - 22 - 22
-- --- -- --
Total stockholders' equity 228 4,496 (228) 4,496
---- ------ ----- -----
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $661 $6,136 $3,192 $9,989
===== ======= ======= ======
</TABLE>
<PAGE>
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARIES
PROFORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED MARCH 31, 1999
AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
PROFORMA
PAN TGL ADJUSTMENTS REFERENCE CONSOLIDATED
--- --- ----------- --------- ------------
<S> <C> <C> <C> <C>
Revenue $1,855 $5,987 - $7,842
Cost of revenue 1,240 4,832 - 6,072
------ ------ -- -----
Gross profit 615 1,155 - 1,770
---- ------ -- -----
Cost and expenses:
Selling, general and administration 517 1,865 - 2,382
Research and development - 147 - 147
Special projects and other costs - 980 - 980
Corporate administration - 736 - 736
Amortization of excess of purchase price over
fair value of net assets acquired - 97 319 d 416
-- --- ---- ---
Total 517 3,825 319 4,661
---- ------ ---- -----
Income / (Loss) before other income (expense) 98 (2,670) (319) (2,891)
--- ------- ----- -------
Other income (expense):
Interest income - 185 - 185
Interest expense (16) (45) (26) e (87)
Foreign currency gains (losses) - (15) - (15)
-- ---- -- ----
(16) 125 (26) 83
---- ---- ---- --
Income (Loss) before provision for income taxes 82 (2,545) (345) (2,808)
Provision for income taxes 7 (396) - (389)
-- ----- ---- -----
Net (Loss) from Continuing Operations 75 (2,149) (345) (2,419)
Loss from Discontinued Operations 24 - - 24
--- -- -- --
Net Income (Loss) $51 ($2,149) ($345) ($2,443)
=== ======== ====== ========
Net loss per common share outstanding - basic ($0.94) ($0.91)
- diluted ======= =======
($0.94) ($0.91)
======= =======
Weighted-average shares - basic 2,278,340 2,695,008
Dilutive effect of potential common shares - -
-- -
Weighted-average shares - diluted $2,278,340 $2,695,008
========== ==========
</TABLE>
<PAGE>
THE TRANSLATION GROUP, LTD. AND SUBSIDIARIES
NOTE TO PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENT
NOTE 1 - ACQUISITION OR DISPOSITION OF ASSETS.
On May 28, 1999, The Translation Group, Ltd. ( TGL ) / (the "Company")
acquired all of the outstanding shares of Planet Access Networks, Inc. ("PAN").
PAN, based in Stanhope, New Jersey, provides a broad range of Internet-related
services, including development of e-commerce sites to build clients' presence
on the World Wide Web, hosting clients' Internet sites on PAN's servers,
maintaining servers operated by clients, and information technology consulting,
including design of clients' computer networks.
The purchase price for the PAN shares (the "PAN Shares") was
approximately $3.8 million, consisting of an aggregate 416,668 shares (the
"Company Shares") of the Company's Common Stock paid as of the closing and
$900,000, payable not later than September 15, 1999. In addition, the Company is
obligated to provide funding to PAN in a minimum amount of $4,000,000 (prior to
costs and expenses of such funding) which may be obtained, at the Company's
discretion, in the form of a public or private sale of securities of the Company
or PAN. To secure such obligations, the Company has pledged the PAN Shares to
the former shareholders of PAN. In the event the Company breaches its
obligations to the former PAN shareholders, their sole remedy is the return of
the PAN Shares and payment by the Company of their costs and expenses of the
transaction. In addition, PAN would retain $250,000 advanced to it by the
Company and any profits earned by PAN subsequent to the closing would be evenly
divided by the Company and PAN.
The Company has also agreed to repurchase the Company Shares within ninety (90)
days of the first anniversary of the acquisition at a price of $7.00 per share,
if, on such anniversary date: (1) the shares of Common Stock are not listed for
trading on a national securities exchange or included on NASDAQ; (2) during the
ninety (90) days preceding such date, the average weekly trading volume is less
than 100,000 shares; and (3) the average of the closing or high bid price during
the twenty (20) trading days preceding such date is less than $10.00 per share.
The terms of the transaction were determined by arms'-length
negotiation between the parties. Prior to the acquisition, there was no material
relationship between the former shareholders of PAN and the Company or any
director, officer or affiliate of the Company or any associate of any such
director or officer.
The Company anticipates that PAN will be operated in accordance with
its prior practices. Jeff Cartwright and Fred Lapero, the officers and principal
shareholders of PAN, will continue to serve as officers of PAN. In addition,
Fred Lapero was elected to the Board of Directors of the Company.
In addition to maintaining PAN's historic business, the Company intends
to utilize PAN's resources to offer the Company's translation services over the
Internet.
<PAGE>
NOTE 2 - PRESENTATION AND PROFORMA ADJUSTMENTS
The unaudited proforma condensed consolidated balance sheet combines the
consolidated balance sheet of TGL at March 31, 1999 and the balance sheet of PAN
at December 31, 1998 as if the acquisition described in Note 1 had been
consummated on March 31, 1999.
The unaudited proforma condensed consolidated statements of operations presented
has been prepared as if the acquisition described in Note 1 had been consummated
as of April 1, 1998.
The financial information of TGL reflects the results of operations
for the period April 1, 1998 to March 31, 1999. The financial information of PAN
reflects the results of operations for the period January 1, 1998 to December
31, 1998.
(a) To reflect acquisition of 1000 shares of Planet Access Networks, Inc.
("PAN") in exchange for 416,668 shares of the Translation Group, LTD. ("TGL") at
a share amount of $7.00 per share before discount and $900,000 Note payable on
September 15, 1999. The note payable has been discounted to $874,000 using the
company's then incremental borrowing rate.
(b) To reflect the discounted value of a guarantee $7 per share at May 28,2000
provided by to PAN shareholders using an expected incremental borrowing rate.
(c)To eliminate the investment and corresponding stockholders equity acquired in
PAN by TGL and to establish the resulting excess of purchase price over fair
value of net assets acquired.
(d) To record amortization of excess purchase price over fair value of assets
acquired using a life of 10 years of $326,000 per year
(e) To record expected interest expense on at acquisition note payable as if the
note were outstanding during the year.
(f) To record the deferred tax liability associated with the termination of
PAN's S-Corporation election resulting from the completion of the transaction
with TGL.
NOTE - 3 EARNINGS PER SHARE
Net loss per share is calculated by treating all common stock issued after March
31, 1999 as outstanding for all periods reported.
