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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, 1999.
[ ] 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
- - -------------- ----------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
30 Washington Avenue
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 X 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 3,235,008 shares as of December 31, 1999.
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<PAGE>
Index
Part I. Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheets - December 31, 1999
(Unaudited) and March 31, 1999
Condensed consolidated statements of operations - Three months
ended December 31, 1999 and 1998 (Unaudited); nine months
ended December 31, 1999 and 1998 (Unaudited)
Condensed consolidated statements of comprehensive operations
- Three months ended December 31, 1999 and 1998 (Unaudited);
nine months ended December 31, 1999 and 1998 (Unaudited)
Condensed consolidated statements of cash flows - Nine months
ended December 31, 1999 and 1998 (Unaudited)
Notes to condensed consolidated financial statements -
December 31, 1999 (Unaudited)
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
December 31, 1999 (unaudited) and March 31, 1999 (unaudited)
<TABLE>
<CAPTION>
December 31, March 31,
1999 1999
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,002,503 $ 1,895,970
Accounts receivable, net of allowance for doubtful
accounts of $49,648 and $71,140, respectively 1,994,670 857,261
Work in process 400,384 390,780
Certificate of deposit, pledged 106,540
Other current assets 360,815 350,337
-------- -------
Total current assets 3,758,372 3,600,888
Property and equipment, net of accumulated depreciation and
amortization of $1,339,733 and $773,878, respectively 2,276,688 1,007,719
Excess of purchase price over fair value of net assets acquired, net of
accumulated amortization of $428,247 and $169,547, respectively 3,844,830 1,249,717
Loans and receivables from officers 149,500 149,500
Other assets 177,962 128,017
-------- -------
TOTAL ASSETS $ 10,207,352 $ 6,135,841
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 493,435 $ 451,631
Notes payable 573,930 196,672
Current maturities of long-term obligations 99,561 123,630
Obligations under capital leases 12,546
Loans payable to officers 21,000
Accrued liabilities 230,158 444,742
Deferred income 488,809 244,780
Income taxes payable 196,855
Deferred income taxes 78,000 -
------- -
Total current liabilities 2,194,294 1,461,455
Long-term obligations, less current maturities 134,913 178,254
Deferred income taxes 32,300 -
------- -
TOTAL LIABILITIES 2,361,507 1,639,709
Commitments and contingencies
Sales price guarantee 1,434,936
Common stock redeemable at the option of purchasers,
416,668 shares issued and outstanding 1,328,129
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, 3,235,008
shares outstanding and 2,260,340 shares issued and to be issued
and 2,270,340 shares outstanding and to be issued, respectively 2,818 2,278
Additional paid-in capital 7,312,698 6,051,985
Unearned portion of compensatory warrants (138,600) (45,000)
Retained earnings (2,044,124) (1,467,025)
Common stock in treasury, 8,000 shares (68,032) (68,032)
Foreign currency translation adjustment 18,020 21,926
------- ------
Total stockholders' equity 5,082,780 4,496,132
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,207,352 $ 6,135,841
============ ===========
</TABLE>
<PAGE>
The Translation Group, Ltd.
and Subsidiaries
Consolidated Statements of Income
For the three months ended December 31, 1999 and 1998 (unaudited)
and the nine months ended December 31, 1999 and 1998 (unaudited)
<TABLE>
<CAPTION>
3 months 3 months 3 months 3 months
December 31 December 31 December 31 December 31
1999 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 3,886,118 $ 1,295,637 $ 9,758,649 $ 4,679,365
Cost of revenue 2,427,020 1,164,140 6,418,793 3,607,254
----------- ----------- ----------- -----------
Gross profit 1,459,098 131,497 3,339,856 1,072,111
Cost and expenses:
Selling, general and administration 834,607 773,745 2,068,035 1,775,934
Research and development 43,843 123,336 80,000
Special projects and other costs
Corporate administration (2) 278,972 406,444 918,544 1,089,816
Amortization of excess of purchase price over
fair value of net assets acquired 94,873 24,221 258,700 72,663
----------- ----------- ----------- -----------
Total 1,252,295 1,204,410 3,368,615 3,018,413
Income (loss) before other income (expense) 206,803 (1,072,913) (28,759) (1,946,302)
Other income (expense):
Interest income 22,325 41,915 67,981 138,273
Interest expense (30,734) (11,742) (88,948) (35,062)
Amortization of compensatory warrants and finance charges(1) (102,400) (102,400)
Foreign currency gains (losses) 3,855 (4,083) 2,796 (17,774)
----------- ------------ ----------- ------------
(106,954) 26,090 (120,571) 85,437
------------ ----------- ------------ -----------
Income (Loss) before provision for income taxes 99,849 (1,046,823) (149,330) (1,860,865)
Provision for income taxes 90,919 (201,168) 182,010 (360,368)
----------- ------------ ----------- ------------
Net income (loss) $ 8,930 $ (845,655) $ (331,340) $ (1,500,497)
=========== ============ ============ ============
Net income (loss) per common share outstanding (basic and diluted) $ 0.03 $ (0.37) $ (0.12) $ (0.66)
=========== =========== ============ ============
Weighted average shares outstanding 3,235,008 2,278,340 2,842,644 2,278,340
=========== =========== =========== ===========
</TABLE>
(1) Includes $125,400 of amortization of deferred stock
based interest expense
(2) Includes $33,000 of amortization of deferred stock
based public relations expense
See accompanying notes to consolidated financial statements.
<PAGE>
The Translation Group, Ltd.
and Subsidiaries
Consolidated Statements of Comprehensive Income
For the three months ended December 30, 1999 and 1998 (unaudited)
and the nine months ended December 30, 1999 and 1998 (unaudited)
<TABLE>
<CAPTION>
3 months 3 months 9 months 9 months
December 31 December 31 December 31 December 31
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net (loss) income $ 8,930 $ (845,655) $ (331,340) $ (1,500,497)
Other comprehensive income (loss)
Currency translation adjustment 9,969 5,875 (3,906) 15,007
-------- ----------- ----------- -------------
Comprehensive income (loss) $ 18,899 $ (839,780) $ (335,246) $ (1,485,490)
======== =========== =========== =============
</TABLE>
<PAGE>
The Translation Group, Ltd.
and Subsidiaries
Consolidated Statements of Cash Flow
For the nine months ended December 31, 1999 and 1998 (unaudited)
<TABLE>
<CAPTION>
9 months 9 months
December 31, December 31,
1999 1998
---- ----
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net (loss) income $ (331,340) $ (1,500,497)
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation and amortization 286,682 423,825
Amortization of excess purchase price over fair value of net assets acquired 258,700
Amortization of discount on acquisition note payable 26,300
Amortization of compensatory warrants 170,400
Deferred income taxes (31,000) (204,276)
Settlement agreement, net of payments 298,573
Changes in operating assets and liabilities:
Accounts receivable (389,830) 503,398
Work in process (9,604) 141,549
Other current assets (8,478) (242,294)
Other assets (82,710) (39,239)
Accounts payable (136,196) 87,011
Accrued liabilities and deferred income (555) 39,876
Accrued income taxes 139,955 (31,954)
------- --------
Net cash provided by (used in) operating activities (107,676) (524,028)
Cash flows provided by (used in) investing activities:
Purchase of property and equipment (1,169,008) (324,746)
Acquisition costs, net of cash purchased of $67,922 37,861
Investment in certificate of deposit 106,540 (6,540)
Loans and advances to officers (147,928) -
--------- -
Net cash provided by (used for) investing activities (1,128,535) (331,286)
Cash flows provided by (used in) financing activities:
Net proceeds from issuance of common stock 1,100,000
Net proceeds from long-term debt 271,978 3,130
Payment of acquisition note payable (900,000)
Payments on long-term obligations (81,328) (56,250)
-------- --------
Net cash provided by (used in) financing activities 390,650 (53,120)
Foreign currency translation adjustment (3,906) 15,007
------- ------
Net (decrease) increase in cash and cash equivalents (893,467) (893,427)
Cash and cash equivalents, beginning of period 1,895,970 1,297,039
--------- ---------
Cash and cash equivalents, end of period $ 1,002,503 $ 403,612
=========== =========
Supplemental disclosure of non-cash investing and financing activities:
On May 1, 1999, the Company acquired the stock of Planet Access
Networks, Inc. as described in Note A.
Supplemental disclosure of cash flow information: Cash paid during the year for:
Interest $ 88,948 $ 35,062
======== ========
Income taxes $ 500 $ 602
===== =====
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include
the accounts of The Translation Group, Ltd., Bureau of Translation Services,
Inc., Word House (from the date acquisition on June 30, 1997) and Planet Access
Networks, Inc. (from the date of acquisition on May 1, 1999). These 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, 1999
are not necessarily indicative of the results that may be expected for the year
ended March 31, 2000.
Footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted in
accordance with rules and regulations of the Securities and Exchange Commission.
The financial statements in this report should be read in conjunction with the
financial statements and notes thereto included in the Form 10-KSB of The
Translation Group, Ltd. (the "Company").
As of May 1, 1999, the Company acquired all the issued and outstanding shares of
Planet Access Networks, Inc. (Planet) for 416,668 shares of its common stock and
cash in the amount of $900,000, payable on September 15, 1999. The Company has
agreed to: (i) secure financing 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
Company to repurchase all or part of the Company's shares, within 90 days of the
first anniversary of the acquisition, at a price of $7.00 per share, if the
shares are not listed on a securities exchange or on NASDAQ and the value per
share at the time is not at least $10.00 and (iii) establish a $250,000 line of
credit for Planet, to be considered as liquidated damages in the event the
Company fails to implement its obligations under the agreement. The cash payment
of $900,000, due on September 15, 1999, has been made as explained in Note D
below. The Company has obtained an extension of time until March 15, 2000 to
obtain the $4,000,000 of financing, for which the Company gave warrants to
acquire 100,000 shares of its common stock.
The Company has accounted for its acquisition of Planet under the purchase
method of accounting; wherein the purchase price is allocated to the assets and
liabilities as of the acquisition date based on estimated respective fair
values. The excess of purchase price over fair value of net assets acquired is
being amortized over 10 years. The condensed consolidated statements of
operations for the nine month period ended December 31, 1999 includes the
operations of Planet for the period from May 1, 1999 to December 31, 1999. Had
the Company acquired Planet as of April 1, 1998, the net loss and earnings per
share would have been $(208,523) and $(.07), respectively, for the nine months
ended December 31, 1999 and $(1,486,706) and $(.65) for the nine months ended
December 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, 1999, Form 10-KSB.
<PAGE>
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 (UNAUDITED)
NOTE B - EARNING PER SHARE
For the purpose of computing earnings per share, average shares outstanding
during the three months ended December 31, 1999 and 1998 was 3,227,008 and
2,278,340 respectively. Average shares outstanding during the nine months ended
December 31, 1999 and 1998 was 2,842,644 and 2,278,340 respectively. In
addition, there are outstanding common stock options of 2,154,000 shares at an
average price of approximately $5.25 per share and 2,821,660 warrants to
purchase common stock of the Company at an average price of approximately $5.12
per share. The computations of earnings per share reflecting the exercise of
these options and warrants are antidilutive.
NOTE C - RETAINED EARNINGS (DEFICIT)
Retained earnings for the nine months ended December 31, 1999 includes a charge
for $245,760 for amortization of the discount on the guaranteed purchase price
of Planet.
NOTE D - ACQUISITION NOTE PAYABLE
On September 15, 1999, the Company raised $1,000,000 of equity from the sale of
500,000 shares of common stock, through a private placement. These proceeds were
used to pay the $900,000 Acquisition Note Payable as described in Note A.
NOTE E - CAPITAL RESOURCES
During the next twelve months the Company anticipates a need for a substantial
increase in its capital resources. The Company will require payment of
$1,000,000 in development expenses for the automated translation systems and
$400,000 for product launch of its Financial Express product. In addition, in
April 2000, the Company may be required to repurchase from the historic
shareholders of Planet Access for $2,916,676, the Company shares issued in the
transaction, if the shares are not listed on a securities exchange or on NASDAQ
and the value per share at the time is not at least $10.00. See "Liquidity and
Capital Resources" under "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
On September 15,1999, the Company raised $1,000,000 in equity as described in
Note D above. Additionally, on November 8, 1999, the Company entered into
another transaction, receiving net proceeds of $475,000 from promissory notes.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for historical information, the material contained in Management's
Discussion and Analysis of Financial Condition and Results of Operations is
forward-looking. For the purpose of the safe harbor provisions for
forward-looking statements of the Private Securities Litigation Reform Act of
1995, readers are urged to review the Company's Annual Report on Form 10-KSB for
the year ended March 31, 1999 for a list of certain important factors that may
cause actual results to materially differ from those described below.
OVERVIEW
The Company translates technical documents and software written in one language
into other languages, and specializes in providing high tech translation and
localization services, principally in the Information Technology ("IT") sector
of the translation market. The Company also offers completely integrated website
design, development and hosting services through its subsidiary, Planet Access
Networks, Inc.
By linking its sophisticated website expertise and language technology, the
Company plans to emerge as a leading supplier of global communications products
and services. The initial products and services include designing websites for
rapid, cost effective translation and offering, via proprietary extranets the
rapid, cost effective translation of content for the software/IT and financial
markets.
The Company has ongoing development programs directed toward the completion of
computer-based automated translation systems. These new powerful information
tools will provide the basis for the creation of unique translation products for
special niche markets. The Company believes that this strategy will result in
significant increases in revenues and profitability. The Company has been in
transition while developing its own software systems through its strategic
licensing relationships with Gedanken, Inc. and ESTeam AB to produce specialized
automated translation products for the financial information technology and
telecommunication fields.
As indicated in Note A above, as of May 1, 1999, the Company acquired all of the
outstanding shares of Planet Access Networks, Inc. (Planet), which develops and
hosts sophisticated e-commerce web sites.
RESULTS OF OPERATIONS
Revenues. Revenues for the quarter ended December 31, 1999 (the "Current
Quarter") increased $2,590,481 to $3,886,118 from $1,295,637 for the quarter
ended December 31, 1998 (the "Comparable Quarter"). Revenue for the nine months
ended December 31, 1999 (the "Current Period") increased $5,079,284, to
$9,758,649 from $4,679,365 for the nine months ended December 31, 1998 (the
"Comparable Period"). The increases in revenues for both the Current Quarter and
the Current Period were principally due to the consolidation of Planet beginning
May 1, 1999. Revenues in the Company's United States translation and
localization services declined due to the completion of a substantial project in
October 1998, continued softness in the Asian economies which has caused clients
to postpone projects intended for sale in those markets, and increased
competition in the software translation markets. To address these issues, the
Company has hired additional sales personnel. However, due to the competitive
conditions in the translation markets, increased quotes do not necessarily
result in immediate increases in sales.
<PAGE>
The Company's future results of operations will also benefit from the
acquisition of Planet. Planet's business has continued to experience substantial
growth, with revenues increasing in the Current Quarter. During the quarter,
Planet Access terminated its contract with Brandwise, LLC due to the substantial
impact of this agreement on Planet Access' day to day operations and the need of
Planet Access to meet other corporate objectives. Planet Access will continue to
serve Brandwise, LLC on a project by project basis. Management does not believe
that the termination of this contract will have a material adverse impact on
revenues or Planet Access' earnings over the next 12 months.
GROSS PROFIT. Gross profit increased to $1,459,098 in the Current Quarter, or
37.5% of sales, from $131,497 in the Comparable Quarter, or 10.1% of sales.
Gross profit increased to $3,339,856 in the Current Period, or 34.2% of sales,
from $1,072,111 in the Comparable Period, or 22.9% of sales. The increases in
gross profit for both the Current Quarter and the Current Period were
principally due to the consolidation of Planet beginning May 1, 1999. Gross
profit for both the Current Quarter and the Current Period were negatively
impacted by higher staffing levels in its United States translation operations,
in anticipation of a number of projects which were delayed by customers. To
address this issue, the Company recently reduced staffing levels at the United
States translation operations. In the longer term, the Company also is seeking
to improve gross profits by investing in better automated translation systems,
which should reduce costs, and by developing specialized automated translation
products for the financial information technology and telecommunication fields,
which should provide greater gross revenues. Gross margin will also increase as
Planet, with its higher gross margin, is consolidated with the Company's
translation and localization businesses.
SELLING, GENERAL AND ADMINISTRATION. Selling, general and administration
("SG&A") expenses decreased by 8% to $834,607 during the Current Quarter from
$773,745 in the Comparable Quarter. SG&A expenses increased for the Current
Period by 16% to $2,068,035 as compared to $1,775,934 in the Comparable Period.
This increase in SG&A expenses for the nine month period reflects increased
marketing expenditures and substantial expenditures to develop the specialized
automated translation products referred to above.
Net Income (Loss). The Company had net income of $8,930, during the Current
Quarter as compared to a net loss of $845,655 for the Comparable Quarter. The
Company incurred a net loss of $331,340 during the Current Period, as compared
to a net loss of $1,500,497 during the Comparable Period. However, the Company
had operating income of $206,803 during the current quarter as compared to an
operating loss of $1,072,913 for the comparable quarter. The Company had
operating loss of $28,759 during the current period as compared to an operating
loss of $1,946,302 for the comparable period.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded its operations with the proceeds of its
initial public offering in 1995, cash flow from operations, and bank line of
credit, which was secured by a certificate of deposit. The acquisitions of the
Word House Group and Planet Access were largely financed by the issuance of the
Company's common stock as the major component of the consideration.
The change in the Company's strategic direction towards accelerated development
of advanced automated translation systems and facilitation of a web-based
strategy has substantially increased the Company's working capital requirements
to the point that cash flow from operations is insufficient to sustain the
Company at its current level of activity.
<PAGE>
During the Current Period, $151,676 was provided by operations, consisting
principally of a substantial increase in accounts payable and accounts
receivable, at Planet Access, which is experiencing substantial growth in its
working capital requirements while its business grows. The Company invested
$1,169,000 in property and equipment, and incurred other changes in cash as
detailed in the accompanying consolidated statement of cash flows.
Working capital decreased $153,000 during the quarter. Of the working capital at
December 31, 1999, $1,823,000 is only available to Planet Access for day to day
operations, since the original agreement provides for non-invasion of the assets
of Planet Access by the parent company until the final completion of all aspects
of this agreement.
Cash flow from operations, together with currently available resources, will be
insufficient to meet these obligations. The Company recently retained one
investment banking firm to assist it in developing a financing plan to fund its
need for additional capital. The Company will likely be exploring a range of
financing options, including the public or private issuance of debt or equity
securities. In addition, the Company retained another firm to seek a strategic
partner for one or more of its businesses. Although the Company is actively
pursing each of these alternatives, and believes that it will be able to obtain
the required financing, there can be no assurance that it will be successful in
completing the financing required by its business plan on commercially
acceptable terms, if at all. If the Company were to be unable to obtain
financing for its business plan, it would be required to reduce the number of
projects in development and/or sell or discontinue existing operations.
YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. The Company's computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
The Company's plan to resolve the Year 2000 Issue involves the following four
phases: assessment, remediation, testing and implementation. To date, the
Company has completed its assessment of all systems that could be significantly
affected by the Year 2000. The Company is primarily in the business of providing
services but those services are supported by the use of computer hardware and
software systems in the production of a substantial portion of those services.
The Company's vendors consist primarily of individual translators and other
service professionals who are not expected to be materially impacted by the Year
2000 Issue. The Company is also dependent upon third party suppliers for utility
services and telecommunications capabilities. The Company has its primary
locations in geographically diverse locations in North America, Europe and Asia.
If one of the Company's locations should be unable to operate due to the Year
2000 Issue affecting one of its third party supplies, the Company believes that
replacement services could be rendered from another of the Company's locations.
The Company has completed a comprehensive study as to whether its third party
suppliers and strategic partners are Year 2000 compliant. It has gathered
information about the Year 2000 status and will continue to assess and monitor
their compliance.
STATUS
The Company has completed a full evaluation of all of its systems and has
completed the remediation phases. The Company believes all critical systems and
hardware are compliant. The Company has tested all equipment and software and
found the Year 2000 readiness plans to be successful.
<PAGE>
THIRD PARTIES
The Company has queried its significant supplies and strategic partners that do
not share information systems with the Company, but has not received answers to
all of its queries. To date, the Company is not aware of any of these third
parties with a Year 2000 Issue that would materially impact the Company's
results of operations, liquidity, or capital resources. However, the Company has
no means of ensuring that they will be Year 2000 ready. The inability of those
third parties to complete their Year 2000 resolution process in a timely fashion
is not expected to materially impact the Company. The Company believes that it
could partially compensate for the failure of those third parties to comply by
utilizing its operations in other geographic locations to meet the client
requirements or by using alternate suppliers.
COSTS
The Company utilized primarily internal resources to reprogram, replace, test
and implement the software and operating equipment for required Year 2000
modifications. The total costs of the Year 2000 project were estimated at
$85,000 and have been funded through operating cash flows. To date the Company
has incurred approximately $55,000 ($40,000 expensed and $15,000 capitalized for
new equipment), related to all phases of the Year 2000 project. At this time the
Company believes there will be no further substantial expenses.
RISKS
Management believes it has an effective program in place to resolve the Year
2000 Issue in a timely manner. As noted above, the Company has completed all
necessary phases of its Year 2000 program. In the event that the Company has
inadvertently not completed any additional phases, the Company's ability to
produce certain orders may be negatively impacted. More importantly, disruptions
resulting from Year 2000 Issues in the world economy in geographies where the
Company or its clients have significant operations could adversely affect the
Company.
The Company may be unable to meet services commitments due to computer system
failure. The amount of potential liability, lost revenue, and damages cannot be
reasonably estimated at this time.
CONTINGENCY PLANS
The Company has put plans into place in order to monitor Year 2000 issues that
may arise. This plan includes the ability for operations and accounting
functions to be transferred between locations and computer systems. Due to the
nature of the service the Company provides, management believes there will be
minimal disruption to production or customer services.
CONCLUSION
The Company believes that there will be no disruption of its operations or
internal functions due to the passing of January 1st, 2000 and its extensive
testing of other Year 2000 issues. The Company will, however, continue to
monitor any other possible effects of Year 2000.
<PAGE>
PART II - OTHER INFORMATION
ITEM I. LEGAL PROCEEDING - None
ITEM 2. CHANGES IN SECURITIES -
During the quarter, the Company amended the terms of its publicly held warrants
ti extend the expiration date to July 2, 2000.
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 -
(a) Exhibit
Exhibit 27 - Financial Data Schedule
(b) Reports on 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.
The Translation Group, Ltd.
Dated February 14, 2000 /s/ Charles D. Cascio
----------------- ---------------------------
Charles D. Cascio
President & CEO
Dated February 14, 2000 /s/ Kenneth A. Mack
----------------- ---------------------------
Kenneth A. Mack
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit (27)
Financial Data Schedule
For Period Ended December 31, 1999
THE TRANSLATION GROUP, LTD
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF THE TRANSLATION GROUP, LTD FOR THE PERIOD ENDED DECEMBER 30,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,002,503
<SECURITIES> 0
<RECEIVABLES> 1,994,670
<ALLOWANCES> 49,648
<INVENTORY> 0
<CURRENT-ASSETS> 3,758,372
<PP&E> 2,276,688
<DEPRECIATION> 1,339,733
<TOTAL-ASSETS> 10,207,352
<CURRENT-LIABILITIES> 2,194,294
<BONDS> 0
0
0
<COMMON> 2,818
<OTHER-SE> 5,079,962
<TOTAL-LIABILITY-AND-EQUITY> 10,207,352
<SALES> 9,758,649
<TOTAL-REVENUES> 9,758,649
<CGS> 6,418,793
<TOTAL-COSTS> 3,339,856
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 88,948
<INCOME-PRETAX> 0
<INCOME-TAX> 182,010
<INCOME-CONTINUING> (331,340)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (331,340)
<EPS-BASIC> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
