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, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
Securities Exchange Act of 1934
For the transition period from _____________ to _______________
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
---------------------------------------------
(Address of principal executive offices)
(203) 656-0777
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(Issuer's telephone number)
- --------------------------------------------------------------------------------
(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 13, 1998 was 6,123,235.
Transitional Small Business Disclosure Format YES [ ] NO [X]
<PAGE>
TRANSACT INTERNATIONAL INC.
FORM 10 - QSB - QUARTER ENDED OCTOBER 31, 1998
INDEX
Page
----
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets
October 31, 1998 (Unaudited) and April 30, 1998 3
Statements of Operations (Unaudited)
Three and Six Months Ended October 31, 1998
and October 31, 1997 4
Statements of Cash Flows (Unaudited)
Six Months Ended October 31, 1998 and October 31, 1997 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
2
<PAGE>
PART I : FINANCIAL INFORMATION
------------------------------
TRANSACT INTERNATIONAL INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 31, APRIL 30,
1998 1998
----------- -----------
ASSETS (UNAUDITED)
CURRENT ASSETS
<S> <C> <C>
Cash $ 3,444 $ 53,307
Accounts receivable, net of allowance for doubtful accounts
of $31,000 and $58,000, respectively 524,465 643,109
Inventories 143,364 209,121
Costs and estimated earnings in excess of billings on
incomplete contracts 137,366 114,602
Prepaid expenses and other current assets 4,110 20,382
----------- -----------
TOTAL CURRENT ASSETS 812,749 1,040,521
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, AT COST 304,436 301,628
Less accumulated depreciation (285,313) (278,677)
----------- -----------
19,123 22,951
OTHER ASSETS 2,300 2,300
----------- -----------
TOTAL ASSETS $ 834,172 $ 1,065,772
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Bank borrowings $ 18,750 $ 56,250
Note payable to stockholder 65,000 85,000
Trade accounts and notes payable 1,499,197 1,328,721
Accrued expenses 390,374 354,065
Current portion of long-term debt 23,657 23,657
Billings in excess of costs and estimated earnings on
incomplete contracts 219,087 417,807
----------- -----------
TOTAL CURRENT LIABILITIES 2,216,065 2,265,500
----------- -----------
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 (7,429,554) (7,247,389)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIENCY (1,381,893) (1,199,728)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 834,172 $ 1,065,772
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE>
TRANSACT INTERNATIONAL INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------- ---------------------------
10/31/98 10/31/97 10/31/98 10/31/97
REVENUE:
<S> <C> <C> <C> <C>
Net sales $ 713,657 $ 1,275,221 $ 1,094,484 $ 2,234,682
Licensing fees -- -- 400,000 --
----------- ----------- ----------- -----------
Total revenue $ 713,657 $ 1,275,221 $ 1,494,484 $ 2,234,682
COSTS AND EXPENSES :
Cost of sales 642,230 1,090,322 1,114,314 1,979,622
Selling and administrative 305,736 295,722 546,132 610,539
----------- ----------- ----------- -----------
947,966 1,386,044 1,660,446 2,590,161
----------- ----------- ----------- -----------
(LOSS) INCOME FROM OPERATIONS (234,309) (110,823) (165,962) (355,479)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE) :
Interest expense (7,776) (8,225) (15,977) (11,229)
Other income (226) 2,504 (226) 2,504
----------- ----------- ----------- -----------
(8,002) (5,721) (16,203) (8,725)
----------- ----------- ----------- -----------
NET (LOSS) INCOME $ (242,311) $ (116,544) $ (182,165) $ (364,204)
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE OF
COMMON STOCK - BASIC AND DILUTED (.04) (.02) (.03) (.06)
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 6,123,235 6,123,235 6,123,235 6,123,235
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
TRANSACT INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------
10/31/98 10/31/97
--------- ---------
OPERATING ACTIVITIES :
<S> <C> <C>
Net (loss) $(182,165) $(364,204)
Adjustments to reconcile net income (loss) to cash
(used in) provided by :
Depreciation of property, plant and equipment 6,636 12,756
Changes in assets and liabilities :
Decrease (increase) in accounts receivable 118,644 (426,184)
Decrease in inventories 65,757 125,148
Decrease in other current assets 16,272 14,626
(Increase) decrease in costs and estimated earnings
in excess of billings on incomplete contracts - net (221,484) 221,222
Increase in accounts payable and accrued expenses 206,785 296,862
--------- ---------
NET CASH PROVIDED BY (USED IN) OPERATIONS 10,445 (119,774)
--------- ---------
INVESTING ACTIVITIES :
Capital expenditures (2,808) (6,748)
--------- ---------
FINANCING ACTIVITIES :
Proceeds from stockholder loan -- 100,000
Repayment of debt (57,500) (55,664)
--------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (57,500) 44,336
--------- ---------
NET DECREASE IN CASH (49,863) (82,186)
CASH, BEGINNING OF PERIOD 53,307 85,370
--------- ---------
CASH, END OF PERIOD $ 3,444 $ 3,184
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 1,665 $ 7,129
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<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 four sentences. The Company has
a stockholders' deficiency and working capital deficiency of $1,381,893 and
$1,403,316, respectively, at October 31, 1998. A number of suppliers are
requiring the Company to pay on or before delivery of parts and equipment.
The Company's sales backlog is $3.1 million at October 31, 1998 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, 1998, the statements of operations for
the three and six months ended October 31, 1998 and 1997 and the statements
of cash flows for the six months ended October 31, 1998 and 1997 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, 1998 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, 1998 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, 1998 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 has
repaid $35,000 of the loan with the balance, including interest, payable
with the proceeds of a project in India.
Due to the loss for the year ended April 30, 1998 the Company was in
default of its term loan with its bank and therefore the balance owed at
April 30, 1998 of $56,250 was classified as a current liability in the
April 30, 1998 balance sheet. The Company is continuing to repay the bank
$6,250 per month plus interest.
4. The Company's licensing agreement with CIMC-TianDa, a Chinese manufacturer
was amended. The revision provided for total compensation of $680,000 of
which $200,000 was recorded in April 1998, $400,000 in the quarter ended
July 31, 1998 and $80,000 will be recorded when received in December 1998.
The $400,000 recorded in the quarter ended July 31, 1998 was received
$100,000 in June and $300,000 in August 1998. The Company has no further
obligations to CIMC-TianDa pursuant to this licensing agreement.
6
<PAGE>
TRANSACT INTERNATIONAL INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
5. 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.
6. There was no benefit for income taxes in the three and six month periods
ended October 31, 1998 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, 1998, 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 $7,000,001 and
$2,000 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 $ 2,600,000
Investment tax credit carryforward 2,000
Other reserves and liabilities 83,000
------------
Valuation allowance 2,685,000
------------
$ --
============
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, 1998 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,
1998 of $242,311 and $182,165, respectively. The losses result primarily from
the decrease in sales for the three and six months ended October 31, 1998 of
$561,564 (44%) and $740,198 (33%), respectively from the comparable periods in
1997. Gross profit for the three and six months ended October 31, 1998 decreased
to 10% from 15% in 1997 due to lower sales volume, including the stoppage of the
New Delhi, India project which resumed in November 1988. However, in the six
months ended October 31, 1998 the Company received $400,000 in licensing fees
and expects its final payment of $80,000 in December 1998.
For the three and six months ended October 31, 1998 the Company `s selling and
administrative expenses were $10,014 higher and $64,407 lower than the
comparable periods in 1997.
The Company's sales backlog as of October 31, 1998 is approximately $3.1
million. This compares to a $2.4 million backlog at October 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES:
During the six months ended October 31, 1998, the Company provided approximately
$10,000 of cash from operations, primarily resulting from the net loss net of a
decrease in accounts receivable and inventory. At October 31, 1998 the Company
has a working capital deficiency of $1,403,316.
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 $3.1 million at October 31, 1998 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
---------------------------------------------------
(a) The 1998 Annual Meeting of Shareholders was held on October 14,
1998.
(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 5,357,449 65,004
Bruno S. Frassetto 5,356,549 70,750
John E. McConnaughy, Jr. 5,361,149 65,904
Randall Sweeney 5,361,234 61,219
(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
Date: December 11, 1998 /s/ Bruno S. Frassetto
- ----------------------- ---------------------------------------
BRUNO S. FRASSETTO
President and Acting Chief Financial Officer
10
<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> 555
<ALLOWANCES> 31
<INVENTORY> 143
<CURRENT-ASSETS> 813
<PP&E> 304
<DEPRECIATION> 285
<TOTAL-ASSETS> 834
<CURRENT-LIABILITIES> 2,216
<BONDS> 0
0
0
<COMMON> 853
<OTHER-SE> (2,234)
<TOTAL-LIABILITY-AND-EQUITY> 834
<SALES> 1,094
<TOTAL-REVENUES> 1,494
<CGS> 1,660
<TOTAL-COSTS> 1,660
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> (182)
<INCOME-TAX> 0
<INCOME-CONTINUING> (182)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (182)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
