UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter period ended October 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-8422
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TRANSACT INTERNATIONAL INC.
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(Exact name of small business issuer as specified in its charter)
Connecticut 06-0732124
- -------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
22 Thorndal Circle, Darien, Connecticut 06820
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(Address of principal executive offices)
(203) 656-0777
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(Issuer's telephone number)
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(Former name, former address and former fiscal
year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or
for such shorter period that the issuer 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 CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of November 14, 1997 was 6,123,235.
Transitional Small Business Disclosure Format YES NO X
----- -----
<PAGE>
TRANSACT INTERNATIONAL INC.
FORM 10 - QSB - Quarter Ended October 31, 1997
Index
Page
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets
October 31, 1997 (Unaudited) and April 30, 1997 3
Statements of Operations (Unaudited)
Three and Six Months Ended October 31, 1997 and
October 31, 1996 4
Statements of Cash Flows (Unaudited)
Six Months Ended October 31, 1997 and October 31, 1996 5
Notes to the Financial Statements (Unaudited) 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders 9
Item 6 Exhibits and Reports on Form 8-K 9
SIGNATURE 10
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<PAGE>
PART I: FINANCIAL INFORMATION
TRANSACT INTERNATIONAL INC.
BALANCE SHEETS
October 31, April 30,
1997 1997
------------ ------------
ASSETS (Unaudited)
CURRENT ASSETS
Cash $ 3,184 $ 85,370
Accounts receivable, net of allowance
for doubtful accounts of $53,000 and
$43,000, respectively 885,449 459,265
Inventories 186,821 311,969
Costs and estimated earnings in excess
of billings on incomplete contracts 254,023 483,180
Prepaid expenses and other current assets 3,326 17,952
------------ ------------
TOTAL CURRENT ASSETS 1,332,803 1,357,736
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost 299,323 292,575
Less accumulated depreciation 265,049 (252,293)
------------ ------------
34,274 40,282
OTHER ASSETS 2,300 2,300
------------ ------------
TOTAL ASSETS $1,369,377 $1,400,318
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Bank borrowings $ -- $ 131,250
Note payable to stockholder 100,000 --
Accounts payable 1,428,465 1,160,394
Accrued expenses 390,374 361,583
Current portion of long-term debt 104,155 47,319
Billings in excess of costs and estimated
earnings on incomplete contracts 88,365 96,300
------------ ------------
TOTAL CURRENT LIABILITIES 2,111,359 1,796,846
------------ ------------
LONG TERM DEBT 18,750 --
------------ ------------
TOTAL LIABILITIES 2,130,109 1,796,846
------------ ------------
STOCKHOLDERS' DEFICIENCY
Preferred stock, no par value, authorized
2,000,000 shares, none issued -- --
Common stock, no par value, authorized
12,000,000 shares, 6,201,735 issued 852,541 852,541
Additional paid-in capital 5,224,726 5,224,726
Treasury stock, at cost : 78,500 shares (29,606) (29,606)
Deficit (6,808,393) (6,444,189)
------------ ------------
TOTAL STOCKHOLDERS' DEFICIENCY (760,732) (396,528)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $1,369,377 $1,400,318
============ ============
SEE NOTES TO FINANCIAL STATEMENTS.
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<PAGE>
TRANSACT INTERNATIONAL INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- -------------------------
10/31/97 10/31/96 10/31/97 10/31/96
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $1,275,221 $2,357,443 $2,234,682 $4,783,560
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales 1,090,322 1,968,248 1,979,622 4,031,636
Selling and administrative 295,722 344,591 610,539 690,191
------------ ------------ ------------ ------------
1,386,044 2,312,839 2,590,161 4,721,827
------------ ------------ ------------ ------------
(LOSS) INCOME FROM OPERATIONS (110,823) 44,604 (355,479) 61,733
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (8,225) (6,836) (11,229) (11,916)
Other income 2,504 79 2,504 759
------------ ------------ ------------ ------------
(5,721) (6,757) (8,725) (11,157)
------------ ------------ ------------ ------------
NET (LOSS) INCOME $ (116,544) $ 37,847 $ (364,204) $ 50,576
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE
OF COMMON STOCK $ (.02) $ .01 $ (.06) $ .01
============ ============ ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING 6,123,235 6,123,235 6,123,235 6,123,235
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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<PAGE>
TRANSACT INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
------------------------
10/31/97 10/31/96
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<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $(364,204) $ 50,576
Adjustments to reconcile net income (loss) to cash
(used in) provided by:
Depreciation of property, plant and equipment 12,756 17,725
Changes in assets and liabilities:
(Increase) in accounts receivable (426,184) (231,553)
Decrease in inventories 125,148 174,408
Decrease in other current assets 14,626 24,083
Decrease (increase) in costs and estimated earnings
in excess of billings on incomplete contracts - net 221,222 (13,530)
Increase (decrease) in accounts payable and accrued expenses 296,862 (222,049)
----------- -----------
NET CASH (USED IN) OPERATIONS (119,774) (200,340)
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INVESTING ACTIVITIES:
Capital expenditures (6,748) (6,134)
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FINANCING ACTIVITIES:
Proceeds from stockholder loan 100,000 --
Repayment of debt (55,664) (25,584)
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 44,336 (25,584)
----------- -----------
NET DECREASE IN CASH (82,186) (232,058)
CASH, BEGINNING OF PERIOD 85,370 287,986
----------- -----------
CASH, END OF PERIOD $ 3,184 $ 55,928
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 7,129 $ 11,916
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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<PAGE>
TRANSACT INTERNATIONAL INC.
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
1. The accompanying financial statements have been prepared assuming
that Transact International Inc. (the "Company") will continue as a
going concern. The Company's ability to continue as a going concern
is uncertain based on the matters discussed in the next three sentences.
The Company has a stockholders' deficiency and working capital
deficiency of $760,732 and $778,556, respectively, at October 31, 1997.
The Company's sales backlog is $2.4 million at October 31, 1997 and
the Company is seeking additional orders and exploring the sale or
licensing of certain product lines that would enable the Company to
continue as a going concern. However, there is no assurance that the
Company will be successful in attaining additional profitable orders or
in selling or licensing certain product lines.
The balance sheet as of October 31, 1997, the statements of operations
for the three and six months ended October 31, 1997 and 1996 and the
statements of cash flows for the six months ended October 31, 1997 and
1996 have been prepared by the Company, without audit. In the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, the
results of operations and cash flows at October 31, 1997 and all periods
presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's April
30, 1997 annual report to stockholders. Seasonality is not a major
factor in the Company's operations. The results of operations for the
three and six month periods ended October 31, 1997 are not necessarily
indicative of those for a full fiscal year.
2. Inventories consist of raw materials and manufacturing supplies.
3. On June 4, 1997 a stockholder of the Company loaned the Company
$100,000 payable October 31, 1997 with interest at 8% per annum. The
Company was unable to repay the loan on October 31, 1997 and
subsequently reach an agreement with the stockholder to pay $5,000 per
month until receipt of the proceeds of an Indian project is received.
Upon receipt of these proceeds from India, expected in the early summer
of 1998, the balance due on the loan from the stockholder will be
repaid.
Due to the loss for the year ended April 30, 1997 the Company was in
default of its term loan with its bank and therefore the balance owed at
April 30, 1997 of $131,250 was classified as a current liability in the
April 30, 1997 balance sheet. In August 1997 the bank waived the
default and therefore the loan, which is payable $6,250 per month plus
interest, is classified in the October 31, 1997 balance sheet as long
term debt and current portion of long term debt.
4. Amounts per share have been computed using the weighted average
number of common shares outstanding during each period. No effect has
been given to shares issuable pursuant to outstanding options as their
effect would be antidilutive.
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<PAGE>
TRANSACT INTERNATIONAL INC.
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
(continued)
5. There was no benefit for income taxes in the three and six month
periods ended October 31, 1997 as the loss generated cannot be carried
back to offset income in prior years.
There was no provision for income taxes in the three and six month
periods ended October 31, 1996, because the Company has a substantial
net operating loss carryforward.
The Company has operating loss carryovers and investment tax credit
carryforwards for tax return purposes of approximately $6,600,000 and
$28,000 respectively, expiring in 1998 through 2010.
The tax effects of temporary differences giving rise to the
Company's deferred tax assets at October 31, 1997 are as follows :
Net operating loss carryforward $ 2,450,000
Investment tax credit carryforward 28,000
Other reserves and liabilities 112,000
-----------
2,590,000
Valuation allowance 2,590,000
-----------
$ --
===========
Due to the Company's cumulative losses, management does not
consider that enough support to overcome the "more likely than
not" criteria existed at October 31, 1997 to record a deferred tax
asset. As a result, for financial reporting purposes, deferred tax
assets are fully reduced by a valuation allowance.
-7-
<PAGE>
TRANSACT INTERNATIONAL INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
The Company incurred net losses for the three and six months ended
October 31, 1997 of $116,544 and $364,204, respectively. The losses
result primarily from the decrease in sales for the three and six months
ended October 31, 1997 of $1,082,222 (45.9%) and $2,548,878 (53.2%),
respectively from the comparable periods in 1996. Sales of transfer
balls decreased, in 1997 from 1996, approximately $290,000 and $760,000
for the three and six months ended October 31, 1997, respectively.
Sales from terminal equipment decreased, in 1997 from 1996,
approximately $780,000 and $1,790,000 for the three and six months ended
October 31, 1997. In 1996 the Company received a few large orders for
transfer balls which were not recurring in 1997. The decline in
terminal equipment sales primarily reflects the lack of projects for the
U.S. Air Force in 1997. Gross profit percentages for the three and six
months ended October 31, 1997 and 1996 were 14.5%, 11.5%, 16.5% and
15.7%, respectively. The decline in gross profit percentages in 1997
was primarily due to (i) a decrease in transfer ball sales which have a
higher gross profit percentage than terminal equipment, and (ii) fixed
overhead expenses comparable to 1996 with less sales in 1997 and small
cost overruns on two projects in 1997.
For the three and six months ended October 31, 1997 the Company reduced
its selling and administrative expenses from 1996 by $48,869 and
$79,652, respectively. The reduction s were primarily in compensation,
travel and rent expense offset by increased legal fees incurred
applicable to Seaport Container Handling Systems, Inc.
The Company's sales backlog as of October 31, 1997 is approximately $2.4
million. This compares to a $3.8 million backlog at October 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES:
During the six months ended October 31, 1997, the Company used
approximately $120,000 of cash in its operations, primarily resulting
from the net loss and an increase in accounts receivable, net of a
decrease in inventory costs and estimated earnings in excess of billings
on incomplete contracts and an increase in accounts payable. At October
31, 1997 the Company has a working capital deficiency of $778,556.
The Company's ability to continue in business is dependent upon its
ability to become profitable and/or sell or license certain product
lines. The Company's sales backlog is $2.4 million at October 31,
1997 and the Company is seeking additional orders and exploring the sale
or license of certain product lines that would enable the Company to
continue as a going concern. However, there is no assurance that the
Company will be successful in attaining additional profitable orders or
in selling or licensing certain product lines.
-8-
<PAGE>
PART II: OTHER INFORMATION
---------------------------
TRANSACT INTERNATIONAL INC.
Item 4. Submission of Matters to a Vote of Security Holders
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(a) The 1997 Annual Meeting of Shareholders was held on October 8,
1997.
(b) The Board of Directors currently consists of the four nominees
listed below.
(c) The following matter was voted upon at the meeting and the
numbers of votes cast for, against, abstained or withheld,
are as follows:
Election of the following individuals to the Board of
Directors:
Name For Withheld
---- --- --------
Frank B. Carder 5,387,496 75,650
Bruno S. Frassetto 5,392,396 70,750
John E. McConnaughy, Jr. 5,395,996 67,150
Randall Sweeney 5,397,896 65,250
(d) Not applicable.
Item 6. Exhibits and Reports of Form 8-K.
--------------------------------
(a) Exhibits - 27 - Financial Data Schedule
(b) Reports on Form 8-K - None
-9-
<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 thereunto duly authorized.
TRANSACT INTERNATIONAL INC.
---------------------------
Registrant
/s/ Bruno S. Frassetto
Date: December 11, 1997 --------------------------------------------
- ------------------------ Bruno S. Frassetto
President and Acting Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> OCT-31-1997
<CASH> 3
<SECURITIES> 0
<RECEIVABLES> 938
<ALLOWANCES> (53)
<INVENTORY> 187
<CURRENT-ASSETS> 1,333
<PP&E> 299
<DEPRECIATION> (265)
<TOTAL-ASSETS> 1,369
<CURRENT-LIABILITIES> 2,111
<BONDS> 0
853
0
<COMMON> 0
<OTHER-SE> (1,612)
<TOTAL-LIABILITY-AND-EQUITY> 1,369
<SALES> 2,235
<TOTAL-REVENUES> 2,235
<CGS> 1,980
<TOTAL-COSTS> 1,980
<OTHER-EXPENSES> 592
<LOSS-PROVISION> 16
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> (364)
<INCOME-TAX> 0
<INCOME-CONTINUING> (364)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (364)
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
