UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended April 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from _____________ to _____________
Commission File Number 0-8422
-----------------------------
TRANSACT INTERNATIONAL INC.
---------------------------
(Name of small business issuer 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) (Zip Code)
Issuer's telephone number, including area code: (203) 656-0777
--------------
Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, NO PAR VALUE
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period 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 [ ]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained to the best of issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment of this Form 10-KSB. [X]
Revenues for the fiscal year ended April 30, 1998 were $3,574,893.
The aggregate market value of the voting and non-voting stock held by
non-affiliates of the registrant at July 7, 1998 was $215,756.
The number of shares outstanding of the registrant's common stock at July
7, 1998 was 6,123,235.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information from Transact International Inc.'s (i) Proxy Statement
for the Annual Meeting of Stockholders to be held on October 14, 1998 is
incorporated by reference into Part III of this Form 10-KSB (a definitive proxy
statement will be filed with the Securities and Exchange Commission within 120
days after the end of the fiscal year covered by this Form 10-KSB).
Transitional Small Business Disclosure Format. YES [ ] NO [X]
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
-------------------------------
Transact International Inc. (formerly Gram Industries Inc.), a
Connecticut corporation ("Transact" or the "Company"), was incorporated in 1958.
The Company operates in one business segment, the sale, design, manufacture and
installation of air cargo materials handling systems and equipment. The air
cargo handling systems and equipment operate in air cargo terminals to
facilitate the storage and movement of the unitized loads and containers in
which air cargo is shipped. Transact also renders consulting and engineering
services related to such systems and equipment.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS AND EXPORT SALES
--------------------------------------------------------------
The Company operates in one business segment, the sale, design,
manufacture and installation of air cargo materials handling systems and
equipment. In 1998, three customers accounted for 14% (U.S. Government), 13%
(Alaska Airlines) and 11% (United Parcel Service), respectively, of net sales.
In 1997 three customers accounted for 32% (United Parcel Service), 29% (U.S.
Government) and 18% (Agricultural and Processed Food Products Export Development
Authority ["Apeda"]), respectively, of net sales. In 1996 three customers
accounted for 28% (U.S. Government), 16% (TianDa Airport Support Ltd.) and 13%
(American Airlines), respectively, of net sales.
Sales to the U.S. Government were $492,106 in 1998, $2,099,000 in 1997
and $1,990,000 in 1996. All of the Company's operations are in the United
States. Export sales to the Far East accounted for 8%, 20% and 16%, of net sales
in 1998, 1997 and 1996, respectively.
(C) NARRATIVE DESCRIPTION OF BUSINESS
---------------------------------
PRINCIPAL PRODUCTS AND SERVICES
-------------------------------
Transact has developed various components comprising a basic cargo
handling system. This system consists of items of specialized equipment that may
be customized to a customer's requirements. These items of equipment may be
purchased separately and are categorized by the location of their use into two
basic groups: terminal equipment and ramp equipment. The majority of sales are
direct to the end user; however, occasionally the Company sells to a general
contractor who has a contract with the end user.
Terminal equipment includes truck dock lifts, transfer vehicles,
elevating transfer vehicles, decks, and storage racks which are installed in a
cargo terminal and are used to receive and store cargo containers and to
retrieve such containers and position them for loading on aircraft by ramp
equipment. Transact terminal equipment systems have been installed in more than
60 locations. Terminal equipment accounted for approximately 49% of Transact's
net sales in 1998.
Ramp equipment is completely mobile and accepts cargo containers at
the ramp area adjacent to the cargo terminal, transports such containers to the
aircraft and loads them into the aircraft by means of conveyance devices. Ramp
equipment includes transporters and loaders. Ramp equipment accounted for
approximately 5% of Transact's net sales in 1998.
Transfer balls are used in decks to facilitate the manual movement of
air cargo containers. Spare parts are sold as replacement parts for ramp
equipment and terminal equipment. Transfer balls and spare parts accounted for
approximately 24% of Transact net sales in 1998.
2
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS -- CONTINUED
PRINCIPAL PRODUCTS AND SERVICES -- CONTINUED
--------------------------------------------
Transact also provides consulting and engineering services to assist
customers in planning, designing and adapting cargo handling systems and in
selecting equipment items based upon their particular requirements. Generally,
no more than two Transact employees are engaged in rendering these services at
any point in time. These services have enabled Transact to gain access to
customers at the planning stage for future systems projects. During 1998 the
consulting and engineering services accounted for less than 1% of Transact's net
sales.
SIGNIFICANT CUSTOMERS/PRINCIPAL MARKETS
---------------------------------------
The Company produces air cargo handling systems and equipment for
airlines, air express and freight companies, airport authorities and the U.S.
Air Force. Sales of air cargo handling systems are comprised of several large
contracts. Therefore, it is not unusual for a few customers to account for a
significant percentage of revenues. Sales to major customers for the three years
ended April 30, 1998 are outlined in Item 1 (b) herein. The loss of any of these
customers, if not replaced with another customer, could have a material adverse
effect on the Company.
RAW MATERIALS AND SUBCONTRACTORS
--------------------------------
During 1993, the Company closed its Memphis, Tennessee manufacturing
facility. The Company is renting a smaller facility in Somerville, Tennessee and
is subcontracting a significant portion of the production of its equipment to
selected manufacturers within the industry. The Company subcontracted
approximately 41% of its cost of sales in 1998. The Company obtains bids from
qualified bidders and determines who will be awarded the subcontract based both
on price and technical ability. Transact's review of potential subcontractors
and the monitoring of their quality control standards minimizes the
subcontracting risk. The materials required are generally available from a large
number of sources. The Company has not experienced any unusual difficulties in
obtaining the raw materials necessary to manufacture its products.
CONTRACTING RISKS
-----------------
Most contracts for the sale of Transact air cargo handling systems and
equipment are the result of competitive bidding. If accepted, the bid price,
which is effective to a certain date and for certain equipment, becomes the
fixed contract price, and is generally not subject to price renegotiations
unless the customer either accepts the bid after its expiration date or changes
the scope of the project by requiring additional or different equipment. In
preparing its bid price, Transact normally includes a margin for estimated
supplier price and subcontractor cost increases; however, Transact's margins,
and accordingly its estimated gross profit, may be adversely impacted by
increases in costs which exceed those anticipated or provided for in its bid.
Transact faces an additional risk of non-payment from a contractor when, on rare
occasions, Transact operates as a subcontractor. Specifically, Transact risks
delay in payment due to the incomplete or faulty performance of the contractor.
Standard provisions in contracts with the U.S. Government allow termination at
the Government's option provided the Government and the Company agree on the
final termination settlement. As of April 30, 1998 the Company's backlog with
the U.S. Air Force was approximately $150,000. Transact's fabrication contracts
may contain substantial per diem penalty clauses for delays in completion
resulting from the actions of Transact or of its subcontractors. Transact,
however, has incurred no substantial liability resulting from either the
non-payment by general contractors or from the penalty clauses.
3
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS -- CONTINUED
BACKLOG
-------
The Company's sales order backlog was $2.6 million as of April 30,
1998. This compares to $3.1 million as of April 30, 1997 and $5.8 million as of
May 3, 1996. All of these orders are supported by signed contracts. However, the
Company is attempting to obtain a subcontractor to manufacture a substantial
portion of one project which represents 65% of the Company's backlog at April
30, 1998. If the Company is unsuccessful in obtaining a subcontractor adjusted
backlog of $900,000 is expected to be completed and invoiced in the year ended
April 30, 1999. If a subcontractor is obtained before the fall of 1998 80% of
the April 30, 1998 backlog is expected to be completed and invoiced prior to
April 30, 1999.
Transact booked approximately $3,100,000 of orders in 1998. This
compares to approximately $5,700,000 of orders booked in 1997 and $8,900,000 of
orders booked in 1996.
COMPETITION
-----------
Transact's primary competitors in terminal equipment systems are three
German firms and the U.S. subsidiary of one of these German firms, all of which
are greater in size and financial resources than Transact. Therefore, the
relationship of the United States dollar to the German Deutsche Mark affects
Transact's competitive position in obtaining new contracts. In the area of ramp
equipment, there are numerous domestic and international competitors, some
larger, some smaller than Transact. Transact competes primarily in the area of
product and systems design, technological change and price. In the area of
transfer balls there are a few domestic and international competitors, some
larger, some smaller than Transact. Transact competes primarily in the area of
product design and price.
PATENTS AND WARRANTIES
----------------------
Transact systems and equipment are not covered by patents. The
industry is one in which rapid technological advances result in frequent changes
to designs and concepts. These frequent changes provide Transact's principal
protection against competition from unauthorized use of its designs and
concepts.
Transact warrants the design, workmanship and material of its terminal
and ramp equipment for one year. Transact includes in its bid the warranty work
which it estimates will be required by each systems contract.
SEASONALITY
-----------
The demand for Transact systems and equipment is not subject to
seasonal change. Transact's sales volume, however, is directly affected by
capital expenditure budgets of the U.S. Government, the air cargo industry and
the overnight package delivery segment of such industry.
WORKING CAPITAL
---------------
For information relating to working capital, see Liquidity and Capital
Resources included in Item 7 herein entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
4
<PAGE>
TRANSACT INTERNATIONAL INC.
ITEM 1. DESCRIPTION OF BUSINESS - CONTINUED
RESEARCH AND DEVELOPMENT
------------------------
The cost of Company sponsored research and development was not
material in the last three years. Major research and development is undertaken
in connection with specific contracts for cargo handling systems or equipment.
The majority of the cost of research and development is incorporated into the
contract price. This practice enables the Company to utilize the results of
research and development conducted for, and paid for by, specific customers in
the overall improvement and updating of its equipment.
ENVIRONMENTAL MATTERS AND REGULATIONS
-------------------------------------
Capital expenditures by the Company for environmental control in the
current year were not material, and the Company does not anticipate that such
expenditures will become material in the next two years. Compliance by the
Company with existing environmental laws and regulations has not had, and is not
anticipated in the next two years to have, any material effect upon the capital
expenditures, earnings or competitive position of the Company.
EMPLOYEES
---------
The Company has approximately 12 employees as of April 30, 1998.
GOVERNMENTAL APPROVAL/REGULATIONS
---------------------------------
The Company is not required to obtain, and is not awaiting, any
governmental approval for the manufacture and sale of any of its products. The
Company does not believe that any existing or probable governmental regulations
have or will have any material effect on the Company.
ITEM 2. PROPERTIES
The Company does not own or invest in any real estate or office
facilities. The principal leased facilities of the Company are as follows:
Darien, Connecticut - Office space including the Company
headquarters located in a 3,312 square foot
facility leased by the Company. The lease
expires September 30, 1999.
Somerville, Tennessee - Manufacturing and office space located in a
8,350 square foot facility leased by the
Company. The lease expires September 30,
2000.
Management believes that all properties are in satisfactory condition
and are adequate for existing and projected operations.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending or contemplated legal proceedings to
which the Company is a party or by which the Company or any of its property is
subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
last quarter of 1998.
5
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's stock is currently traded on the OTC Bulletin Board. As
of July 7, 1998 there were 6,123,235 shares of Common Stock outstanding, held by
approximately 2,100 stockholders of record. The over-the-counter stock
quotations below were obtained through the Internet by accessing America On Line
and retrieving historical stock price quotes from PC Quote (pcquote.com). Such
quotations reflect inter-dealer prices without retail mark-up or mark-down or
commissions and may not necessarily represent actual transactions. The Company
has not paid dividends on its common stock during the two most recent years and
does not anticipate that any dividends will be paid in the near future.
1998 1997
------------ ------------
High Low High Low
---- ---- ---- ----
1st Quarter $.25 $.13 $.28 $.06
2nd Quarter $.13 $.13 $.22 $.06
3rd Quarter $.22 $.13 $.25 $.06
4th Quarter $.13 $.09 $.34 $.09
ITEM 6. FIVE YEAR FINANCIAL SUMMARY
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
---------------------------------------------------
1998 1997 1996 1995 1994
---------------------------------------------------
(In thousands of dollars, except per share)
SUMMARY OF OPERATIONS :
<S> <C> <C> <C> <C> <C>
Net sales $ 3,575 $ 7,252 $ 7,208 $ 8,086 $ 9,199
Net (loss) income $ (803) $ (209) $ (791) $ (230) $ 450
Net (loss) income per common share $ (.13) $ (.03) $ (.13) $ (.04) $ .07
Cash dividends declared $ NONE None None None None
BALANCE SHEET DATA :
Total assets $ 1,066 $ 1,400 $ 2,178 $ 2,602 $ 2,693
Long-term debt including current maturities $ 24 $ 47 $ 82 $ 185 $ 313
</TABLE>
Notes:
1. Results for 1994 include a charge of $212,500 for settlement of
litigation and a credit of $150,000 for the reversal of an
allowance for the collection of a note receivable.
6
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL DISCUSSION
Transact operates in one business segment which includes the design,
installation, manufacture and service of products and systems for handling air
cargo. These products and systems are sold to airlines, air express and freight
companies, airport authorities and the U.S. Air Force. However the Company has
designed and developed equipment and systems to handle marine containers. The
Company has received a number of patents for the design of its equipment for
handling marine containers. The Company has licensed the patents and technology
it developed for marine containers to Seaport Container Storage Systems, Inc.
The agreement with Seaport is subject to adequate funding by Seaport and
Transact Board approval. As of June 30, 1998 Seaport has not successfully
obtained funding but is talking to a few interested parties.
The Company subcontracts a significant portion of the production of
its systems and equipment to selected manufacturers within the industry thereby
shifting the risk of cost overruns associated with the manufacturing process
from the Company to the subcontractor and reducing the financial impact of
changes in workload. In addition, in many instances the payment terms of the
prime contract are passed on to the subcontractor. As a result, the contract is,
in effect, financed by the subcontractor and not the Company.
The Company's sales contracts are primarily the result of competitive
bids at fixed prices for specified equipment. At the time of bidding, the
Company provides for estimated cost increases for materials and subcontractors
based upon its past experience with similar contracts. However, increases in
costs which exceed those anticipated or provided in its bid adversely effect
gross profit.
The Company's present principal competitors for terminal projects are
German-based companies and in one case a U.S. subsidiary of a German based
company. Therefore, the relationship of the U.S. dollar to the German Mark
affects the Company's competitive position in obtaining new contracts. The
Company's principal competitors for ramp equipment and transfer balls are U.S.
businesses.
RESULTS OF OPERATIONS
SALES
Sales of air cargo handling systems are comprised of several large
contracts. Therefore it is not unusual for a few customers to account for a
significant percentage of net sales. The U.S. Air Force has been a significant
customer for the last three years, accounting for 14%, 29% and 28% of net sales
in 1998, 1997 and 1996, respectively. United Parcel Service, a domestic
commercial customer accounted for 11% and 32% of 1998 and 1997 sales,
respectively. Apeda, a customer in India, accounted for 5% and 18% of 1998 and
1997 sales, respectively. Alaska Airlines, a domestic commercial customer,
accounted for 13% of 1998's sales. Export sales to the Far East accounted for
8%, 20% and 16% of net sales in 1998, 1997 and 1996, respectively. Sales to the
U.S. Air Force for the next one to three years is anticipated to be reduced
because of a decrease in spending by the U.S. Air Force for air cargo handling
equipment.
7
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
Sales by product type for each of the three years ended April 30,
1998, 1997 and 1996 were approximately as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Project Revenue $1.9 MILLION $4.8 million $6.1 million
Transfer Balls and Spare Parts $1.4 MILLION 2.4 million 1.0 million
Licensing $ .2 MILLION --- ---
Other $ .1 MILLION .1 million .1 million
------------ ------------ ------------
Total $3.6 MILLION $7.3 million $7.2 million
============ ============ ============
</TABLE>
Project revenue in 1996 included approximately $1.3 million of mobile
equipment while 1998 and 1997 each has less than $.3 million of mobile equipment
revenues. Large orders for transfer balls were shipped in 1997.
GROSS PROFIT
Gross profits were 9% in 1998, 14% in 1997 and 9% in 1996. The
increase in 1997 was because of the increased sales of transfer balls, which
have higher gross profit margins than project revenues, and the absence of the
large cost overruns incurred in 1996 described in the following sentence. The
decrease in 1996 was due to cost overruns on the approximate $1.3 million of
ramp equipment sold in 1996 on the American Airlines project. The decrease in
1998 results from cost overruns on a few projects and lower sales volume to
absorb the plant costs.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses decreased 10% in 1998 from 1997,
16% in 1997 from 1996 and 11% in 1996 from 1995. The 1998 decrease was primarily
from reduced officers salaries, travel expenses and office rent. In 1997 the
decrease was primarily due to reduced officers compensation costs resulting from
the retiring of one officer. In 1996, the reduction was primarily due to reduced
travel expenses and employee benefits, including in 1996, the elimination of the
Company's discretionary contribution to the 401(k) plan that was accrued at
April 30, 1995.
SALES BACKLOG
The Company's sales order backlog was $2.6 million as of April 30,
1998. However, $1.7 million of the April 30, 1998 backlog relates to a project
in India for which the Company is seeking a subcontractor. If unsuccessful the
project will not be completed by the Company. This compares to $3.1 million as
of April 30, 1997 and $5.8 million as of May 3, 1996. All of these orders are
supported by signed contracts. The Company expects to complete and invoice all
of its April 30, 1998 sales order backlog prior to April 30, 1999 with the
possible exception of the $1.7 million India project previously mentioned.
LIQUIDITY AND CAPITAL RESOURCES
In 1998 the working capital deficiency increased $785,869 resulting
primarily from the net loss for the year. The Company is in default of its
agreement with its bank and therefore the entire bank loan payable at April 30,
1998 of $56,250 is due on demand. The Company is continuing to pay the bank the
monthly principal installments of $6,250. The Company will be discussing a
continuation of these monthly payments with the bank. However, there is no
assurance that the bank will agree to postpone demanding payment of the loan.
Also, a number of suppliers have refused to
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
extend the Company credit which has created difficulties for the Company in
selling spare parts and transfer balls. It is the Company's practice to have its
subcontractors subject to the same payment terms as the Company has with its
customer for terminal projects. Thus, portions of the Company's sales contracts
are financed by its subcontractor and not the Company. The Company does not
anticipate any material capital expenditures for 1999.
The Company is presently seeking additional orders and is exploring
the sale or license of certain or all 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 arranging a satisfactory payment schedule with its
bank or in attaining additional profitable orders or in selling or licensing any
product lines. Therefore, there is no assurance that the Company will be able to
meet its obligations during the next year.
INFLATION
In management's opinion, the impact of inflation for the three most
recent years is not significant to the financial statements as reported.
ITEM 8. FINANCIAL STATEMENTS
The following financial statements of the Company, together with the
report of independent auditors are included herein:
(1) Financial Statements
--------------------
Page
----
Independent Auditors' Report 14
Balance Sheets--April 30, 1998 and 1997 15
Statements of Operations--Years ended April 30, 1998,
1997 and 1996 16
Statements of Cash Flows--Years ended April 30, 1998,
1997 and 1996 17
Notes to Financial Statements 18
All schedules for which provision is made in applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are not applicable and, therefore, have been omitted.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None; see Item 14(b) regarding changes in the Company's certifying
accountants.
9
<PAGE>
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The Company's directors and officers, the principal occupation or
employment of each such person and the name and principal business of any
organization by which such person is employed, other than the Company, are as
follows: Frank B. Carder, Director and Chairman of the Board of the Company,
Bruno S. Frassetto, Director, President and Chief Executive Officer of the
Company, John E. McConnaughy, Jr., Director of the Company and Randall W.
Sweeney, Director of the Company and President of DAI, Inc., a consulting firm
for government contractors. Additional information required by this item is
incorporated by reference herein to the section entitled "Information Concerning
Directors, Executive Officers, Promoters and Control Persons" contained in the
Company's Proxy Statement related to its 1998 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION
The Company hereby incorporates by reference herein the information
with respect to executive compensation which is contained in the section
entitled "Executive Compensation" set forth in the Company's Proxy Statement
related to its 1998 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company hereby incorporates by reference herein the information
with respect to security ownership of certain beneficial owners and management
from the section entitled "Security Ownership of Certain Beneficial Owners and
Management" set forth in the Company's Proxy Statement related to its 1998
Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company hereby incorporates by reference herein the information
with respect to certain relationships and related transactions which is
contained in the section entitled "Other Information Concerning Directors and
Executive Officers" set forth in the Company's Proxy Statement related to its
1998 Annual Meeting of Stockholders.
10
<PAGE>
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a) (3) The exhibits filed with this report pursuant to Item 601 of
Regulation S-B are as follows:
3(i) Amended and Restated Certificate of Incorporation of
Transact International Inc. (10/19/83). This exhibit is
incorporated by reference to Exhibits 3.1 and 3.2 to the
Company's Annual Report on Form 10-K for the fiscal year
ended April 30, 1987 Commission File No. 0-8422 (the "1987
10-K").
3(ii) The By-Laws of Transact International Inc. (formerly Gram
Industries Inc.). This exhibit is incorporated by reference
to Exhibit 3.3 to the 1987 10-K.
10.1 The 1978 Employee's Stock Option Plan. This exhibit is
incorporated by reference to Exhibit 10.1 to the 1987 10-K.
10.2 Transact International Inc. 401(k) Profit Sharing Plan. This
exhibit is incorporated by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the fiscal year
ended April 30, 1992 Commission File No. 0-8422 (the "1992
10-K").
10.3 Transact International Inc. Money Purchase Pension Plan.
This exhibit is incorporated by reference to Exhibit 10.3 to
the 1992 10-K.
10.4 Transact Employment Agreement, dated as of August 1, 1991
between Transact International Inc. and Frank B. Carder.
This exhibit is incorporated by reference to Exhibit 10.4 to
the Company's Annual Report on Form 10-KSB for the fiscal
year ended April 30, 1995, Commission File No. 0-8422 (the
"1995 10-KSB").
10.5 Transact Employment Agreement, dated as of August 1, 1991
between Transact International Inc. and Bruno S. Frassetto.
This exhibit is incorporated by reference to Exhibit 10.5 to
the Company's 1995 10-KSB.
10.6 Transact Employment Agreement, dated as of June 24, 1991
between Transact International Inc. and Axel Coelln. This
exhibit is incorporated by reference to Exhibit 10.6 to the
Company's 1995 10-KSB.
27. Financial Data Schedule.
(b) No reports on Form 8-K were filed during the fourth quarter of
the Company's most recent year. However, in the first quarter of
fiscal 1999 Form 8-K was filed for the Changes in the Company's
Certifying Accountants.
11
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Company has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
TRANSACT INTERNATIONAL INC.
Date: July 23, 1998 By:/S/ BRUNO S. FRASSETTO
--------------------------------
Bruno S. Frassetto
President and Principal Financial
and Accounting Officer
12
<PAGE>
In accordance with the Securities Exchange Act of 1934, this Report on
Form 10-KSB has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated:
Date: July 23, 1998 /S/ FRANK B. CARDER
-----------------------------------
Frank B. Carder
Director, Chairman of the Board
Date: July 23, 1998 /S/ BRUNO S. FRASSETTO
-----------------------------------
Bruno S. Frassetto
Director, President
Date: July 23, 1998 /S/ JOHN E. MCCONNAUGHY, JR.
-----------------------------------
John E. McConnaughy, Jr.
Director
Date: July 23, 1998 /S/ RANDALL W. SWEENEY
-----------------------------------
Randall W. Sweeney
Director
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Board of Directors and Stockholders
Transact International Inc.
22 Thorndal Circle
Darien, Connecticut 06820
We have audited the accompanying balance sheet of Transact International Inc. as
of April 30, 1998, and the related statements of operations and cash flows for
the year 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 audit. The financial statements of Transact
International Inc. as of April 30, 1997 and 1996 were audited by other auditors
whose report dated July 11, 1997, on those statements included an explanatory
paragraph describing conditions that raised substantial doubt about the
Company's ability to continue as a going concern.
We conducted our audit 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 audit provides 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 Transact International Inc. as
of April 30, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Transact
International Inc. will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company has a working capital deficiency and an
equity deficiency at April 30, 1998 and has incurred operating losses for each
of the years in the three year period ended April 30, 1998. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are described in Note 1.
The accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
MARDEN, HARRISON & KREUTER Certified Public Accountants, P.C.
/S/ MARDEN HARRISON & KREUTER, CPAs, P.C.
Port Chester, New York
July 6, 1998
14
<PAGE>
TRANSACT INTERNATIONAL INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30,
--------------------------
1998 1997
----------- -----------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 53,307 $ 85,370
Accounts receivable, net of allowance for doubtful accounts of
$58,000 and $43,000, respectively 643,109 459,265
Inventories 209,121 311,969
Costs and estimated earnings in excess of billings on
uncompleted contracts 114,602 483,180
Prepaid expenses and other current assets 20,382 17,952
----------- -----------
TOTAL CURRENT ASSETS 1,040,521 1,357,736
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, AT COST 301,628 292,575
Less accumulated depreciation 278,677 252,293
----------- -----------
22,951 40,282
OTHER ASSETS 2,300 2,300
----------- -----------
$ 1,065,772 $ 1,400,318
----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Bank borrowings $ 56,250 $ 131,250
Note payable to stockholder 85,000 --
Trade accounts and notes payable 1,328,721 1,160,394
Accrued expenses 354,065 361,583
Current portion of long-term debt 23,657 47,319
Billings in excess of costs and estimated earnings on
uncompleted contracts 417,807 96,300
----------- -----------
TOTAL CURRENT LIABILITIES 2,265,500 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,
issued 6,201,735 shares 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 (7,247,389) (6,444,189)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIENCY (1,199,728) (396,528)
----------- -----------
$ 1,065,772 $ 1,400,318
----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
TRANSACT INTERNATIONAL INC.
STATEMENTS OF OPERATIONS
YEAR ENDED APRIL 30,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
NET SALES $ 3,574,893 $ 7,252,035 $ 7,208,015
----------- ----------- -----------
COSTS AND EXPENSES
Cost of sales 3,262,404 6,238,196 6,570,860
Selling and administrative 1,072,878 1,192,975 1,425,911
----------- ----------- -----------
4,335,282 7,431,171 7,996,771
----------- ----------- -----------
LOSS FROM OPERATIONS (760,389) (179,136) (788,756)
----------- ----------- -----------
OTHER (EXPENSE) INCOME
Interest expense (46,273) (39,210) (19,271)
Other income 3,462 9,546 16,983
----------- ----------- -----------
(42,811) (29,664) (2,288)
----------- ----------- -----------
NET LOSS $ (803,200) $ (208,800) $ (791,044)
----------- ----------- -----------
NET LOSS PER SHARE OF COMMON STOCK
- - BASIC AND DILUTED $ (.13) $ (.03) $ (.13)
=========== =========== ===========
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
TRANSACT INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
-----------------------------------
1998 1997 1996
--------- --------- ---------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $(803,200) $(208,800) $(791,044)
Adjustments to reconcile net loss to cash (used in)
provided by operating activities :
Depreciation of property, plant and equipment 26,384 36,645 40,794
Increase in allowance for doubtful accounts 15,000 16,175 52,000
Changes in assets and liabilities :
Accounts receivable (198,844) 545,880 736,120
Inventories 102,848 94,781 (81,322)
Prepaid expenses and other current assets (2,430) 2,159 970
Costs and estimated earnings in excess of billings on
uncompleted contracts - net 690,083 (267,524) (636,963)
Other assets -- -- (300)
Accounts payable and accrued expenses 160,811 (401,453) 762,655
--------- --------- ---------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (9,348) (182,137) 82,910
--------- --------- ---------
INVESTING ACTIVITIES
Capital expenditures (9,053) (14,848) (40,647)
Repayment of note receivable -- 48,152 57,328
--------- --------- ---------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (9,053) 33,304 16,681
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from bank borrowings -- -- 150,000
Proceeds from stockholder loan 100,000 -- --
Repayment of bank borrowings (75,000) (18,750) --
Repayment of stockholder loan (15,000) -- --
Repayment of debt (23,662) (35,033) (102,555)
--------- --------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (13,662) (53,783) 47,445
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH (32,063) (202,616) 147,036
CASH, BEGINNING OF YEAR 85,370 287,986 140,950
--------- --------- ---------
CASH, END OF YEAR $ 53,307 $ 85,370 $ 287,986
--------- --------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 19,145 $ 19,210 $ 19,271
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
TRANSACT INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
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 below. The financial statements do not include any adjustments
relating to the recoverability and classification of assets or the amounts of
liabilities that might be necessary should the Company be unable to continue as
a going concern. The Company's continuation as a going concern is dependent upon
its ability to arrange a satisfactory payment schedule with its bank and to
return to profitability and/or sell or license certain or all product lines to
generate sufficient cash flow to meet its obligations on a timely basis.
The Company has a stockholders' deficiency and working capital
deficiency of $1,199,728 and $1,224,979, respectively, at April 30, 1998 and has
incurred losses for each of the years in the three year period ended April 30,
1998. The Company's loss for the year ended April 30, 1998 violates the
financial covenants of the loan agreement with its bank. The Company liability
of $56,250 for bank debt is payable on demand of the bank. The Company continues
to pay monthly principal payments to the bank of $6,250 and intends to discuss a
continuation of this arrangement with the bank. The Company is presently seeking
additional orders and is exploring the sale or license of certain or all 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 arranging a
satisfactory payment schedule with its bank or in attaining additional
profitable orders or in selling or licensing any product lines.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS:
The Company operates in one business segment, the sale, design,
manufacture and installation of air cargo materials handling systems and
equipment.
Sales to the U.S. Government were $492,106 in 1998, $2,099,000 in 1997
and $1,990,000 in 1996. All of the Company's operations are in the United
States. Export sales to the Far East accounted for 14%, 20% and 16%, of net
sales in 1998, 1997 and 1996, respectively.
REVENUE RECOGNITION:
The Company utilizes the percentage of completion method of accounting
measured by the percentage of cost incurred to date to estimated total cost of
each contract to record income on uncompleted contracts. Whenever it is
estimated that a loss will be incurred on a contract, the entire amount of the
estimated loss is recognized. Because of the inherent uncertainties in
estimating revenue and costs, it is at least reasonably possible that the
estimates used will change within the near term. All other revenue is recorded
upon shipment of the product or providing the service.
ACCOUNTS RECEIVABLE:
Accounts receivable include amounts currently due from customers. At
April 30, 1998 and 1997, accounts receivable included $10,000 due from an
officer/stockholder.
18
<PAGE>
TRANSACT INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES:
Inventories are stated at the lower of cost or market. Cost is
determined on a first in, first out basis. Inventories consist of raw materials
and manufacturing supplies.
PLANT AND EQUIPMENT:
Depreciation on plant and equipment is provided by the straight-line
method based on the estimated useful lives of the assets, ranging from 3 to 20
years.
PER SHARE DATA:
Amounts per share have been computed using the weighted average number
of common shares outstanding during each year (6,123,235 in 1998, 1997 and
1996). During the year ended April 30, 1998, the Company adopted Statement of
Financial Accounting Standards No. 128 "Earnings per share (SFAS 128)" which
establishes new standards for computing and presenting earnings per share. As
required by the standard prior period earnings per share data have been
restated.
Under SFAS 128, net income (loss) per share basic is computed based on
the weighted average number of shares of common stock outstanding. Net income
(loss) per share - diluted reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised and converted
into common stock or otherwise resulted in the issuance of common stock and is
computed similarly to "fully diluted" net income (loss) per share that was
reported under previous accounting standards. Dilutive potential common shares
did not have a significant dilutive effect.
INCOME TAXES:
The Company's deferred tax provision is determined under the liability
method. Under this method, deferred tax assets and liabilities are recognized
based on differences between the financial statement carrying amount and the tax
basis of assets and liabilities using presently enacted tax rates.
CONCENTRATION OF CREDIT:
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of trade receivables. The
Company's customers are concentrated in the aviation industry. The U. S.
Government accounted for 14% in 1998, 29% in 1997 and 28% in 1996, of net sales.
United Parcel Service, a domestic commercial customer, and Apeda, a customer
located in India, accounted for 11% and %5 , respectively, of 1998 net sales and
32% and 18%, respectively, of 1997 net sales. Alaska Airlines accounted for 13%
of 1998 net sales. TianDa Airport Support Ltd, a foreign commercial customer,
accounted for 16% of net sales in 1996. American Airlines, a domestic commercial
customer, accounted for 13% in 1996 of net sales. The Company routinely assesses
the financial strength of its customers and as a consequence, believes that its
trade accounts receivable credit risk exposure is limited.
19
<PAGE>
TRANSACT INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amounts reported in the balance sheets for cash, accounts
receivable and trade accounts and notes payable approximate their fair value
because of the immediate or short-term maturity of these financial instruments.
The Company's bank loan bears interest at 1% over the bank's prime lending rate
and therefore approximates fair value.
MANAGEMENT ESTIMATES:
The preparation of 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 the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. Actual results could differ from those estimates.
NOTE 3 - LICENSING AGREEMENT
In April 1998 the Company entered into a licensing agreement with CIMC
- - TianDa, a Chinese manufacturer. The licensing agreement provides:
A. Transact will provide:
a. Existing drawings and bills of material for certain
equipment previously engineered by Transact.
b. Engineering/design and procurement assistance on an air
cargo handling project in Shanghai, China.
c. 1,000 hours of technical assistance.
B. CIMC - TianDa will pay to Transact a maximum of $1 million as
follows:
a. $300,000 upon receipt of existing drawings for certain
equipment per the agreement.
b. $200,000 if and when CIMC - TianDa is awarded the Shanghai
Airport project or a similar major project in China or is
awarded a contract from Transact for four sets of ETV's
(payable at a rate of $100,000 for each two sets with a
maximum payment of $200,000).
c. Balance of $500,000 in seven equal annual installments of
$50,000 and one payment of $150,000 eight years after CIMC
-TianDa is awarded either the Shanghai Airport project or a
similar major project in China.
At April 30, 1998 the Company recognized $200,000 of income for
existing drawings that were supplied to CIMC -TianDa and provided $10,000 for
engineering services to be supplied. The aforementioned $200,000 was received in
May 1998.
20
<PAGE>
TRANSACT INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 -- COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON
UNCOMPLETED CONTRACTS
The terms for billing contracts vary from contract to contract.
Billings are based on either a percentage of completion, costs incurred or
specific milestone payments. Costs and estimated earnings in excess of billings
on uncompleted contracts (net asset and liability) as of April 30, 1998 and 1997
are as follows :
1998 1997
----------- -----------
Costs incurred on uncompleted contracts $ 4,741,908 $ 7,738,592
Estimated earnings 503,374 1,436,815
----------- -----------
5,245,282 9,175,407
Less : billings to date 5,548,487 8,788,527
----------- -----------
$ (303,205) $ 386,880
=========== ===========
The Company expects to complete the projects in process at April 30,
1998 within one year.
NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment (at cost) at April 30, 1998 and 1997
consists of :
1998 1997
-------- --------
Machinery and equipment $ 55,708 $ 55,708
Furniture and fixtures 245,920 236,867
-------- --------
$301,628 $292,575
======== ========
NOTE 6 -- DEBT
In January 1997, the Company converted its $150,000 short-term bank
note payable to a term loan payable, to the same bank, in twenty-four equal
monthly principal installments of $6,250 commencing February 15, 1997. The term
loan bears interest at 1% over the bank's prime lending rate (the bank's prime
lending rate was 8 1/2% at April 30, 1998 and 1997) and is collateralized by all
of the Company's assets. The financial covenants of the term loan were violated
due to the Company's loss for the year ended April 30, 1998. Since April 30,
1998, the Company has continued to pay the monthly principal installments of
$6,250. The Company will be discussing a continuation of these monthly payments
with the bank. However there is no assurance that the bank will agree to
postpone demanding payment of the loan. The entire $56,250 payable to the bank
at April 30, 1998 has been classified as a current liability in the accompanying
1998 balance sheet.
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 reached an
agreement with the stockholder to pay $5,000 per month until receipt of the
proceeds of an India project is received. The entire outstanding balance at
April 30, 1998 of $ 85,000 is shown as a current liability. The Company is
current with these monthly payments thru May 1998. Receipt of the proceeds of
the India project cannot be estimated until a subcontractor is engaged to
complete the project.
21
<PAGE>
TRANSACT INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - DEBT (CONTINUED)
The current portion of long-term debt of $23,657 is payable to the
U.S. Air Force. This liability relates to an overpayment by the Air Force on a
contract in 1993 and bears interest as fixed by the Secretary of the Treasury,
pursuant to Public Law 95-563. The interest rate at April 30, 1998 was 6.75%.
NOTE 7 -- ACCRUED EXPENSES
Accrued expenses at April 30, 1998 and 1997 consists of :
1998 1997
-------- --------
Compensation, vacation and severance $ 84,350 $ 79,443
Contract retainage 1,145 67,486
Retirement plans 70,405 70,405
Directors' fees 71,533 57,700
Other 126,632 86,549
-------- --------
$354,065 $361,583
======== ========
NOTE 8 -- LEASES
The Company leases certain facilities, furniture and automobiles under
noncancelable operating leases. The following is a schedule of the future
minimum rental commitments on such leases at April 30, 1998 :
Year Ending April 30,
---------------------
1999 $ 112,125
2000 76,459
2001 24,058
Rent expense was $97,664 in 1998, $141,437 in 1997 and $176,037 in
1996.
NOTE 9 -- STOCKHOLDERS' EQUITY AND STOCK OPTIONS
A net loss during each of the years in the three year period ended
April 30, 1998 was the only change in Stockholders' Equity.
The Company's 1978 Employee's Incentive Stock Option Plan ("1978
Plan") provides that options may be granted to acquire a maximum of 100,000
shares of the Common Stock at not less than 85% of market price on the date of
grant.
At April 30, 1997, there were 22,000 options outstanding and
exercisable, with an option price of $1.50 per share. No options were exercised
during fiscal 1998 and as of April 30, 1998 there were no options outstanding.
There are 78,000 options subject to future grant and all options expire 10 years
from the date of grant.
22
<PAGE>
TRANSACT INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- STOCKHOLDERS' EQUITY AND STOCK OPTIONS (CONTINUED)
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," which was effective for the Company beginning May 1,
1996. SFAS No. 123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply APB Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded.
The salary of one officer was deferred for future payment by $70,000
in 1996 as a result of the Company's operating conditions. Of this amount,
$60,000 was waived by this officer in 1997. In addition, the salary of one
officer was reduced by $45,000 in 1997 and salaries of two officers were reduced
by $65,000 in 1996, as a result of operating conditions.
NOTE 10 -- EMPLOYEE RETIREMENT PLANS
The Company has a 401(k) Profit Sharing Plan and a Money Purchase
Plan. Employee participation in the 401(k) Profit Sharing Plan is voluntary.
Under the provisions of the 401(k) Plan, employees may defer up to 19% of their
annual compensation. Prior to freezing the Money Purchase Plan, (see paragraph
below) the Company was required to contribute an amount equal to 3% of the
employee's compensation. The Company accrued for the year ended April 30, 1995,
a matching discretionary contribution of 50% of the employees 401(k)
contributions, with a cap of 3% of the employees compensation. However, in
fiscal 1996, due to the Company's losses, the Company decided not to contribute
the discretionary amount applicable to the 401(k), previously accrued at April
30, 1995 and to discontinue such matching until business conditions improve. As
a result, pension expense was $0 in 1998 and 1997 and ($17,269) in 1996.
Effective June 1, 1996, the Company froze its Money Purchase Plan.
This action eliminates any future liability of the Company in respect to the
Plan while the Plan is frozen. This action does not constitute an effective
termination of the Plan.
NOTE 11 -- INCOME TAXES
There is no benefit for income taxes in 1998, 1997 and 1996 as the tax
losses generated in those years cannot be carried back to offset income in prior
years.
The tax effects of temporary differences giving rise to the Company's
deferred tax assets are as follows :
APRIL 30,
------------------------
1998 1997
----------- -----------
Net operating loss carryforward $ 2,640,000 $ 2,347,000
Investment tax credit carryforward 2,000 28,000
Other reserves and liabilities 83,000 112,000
----------- -----------
2,725,000 2,487,000
Valuation allowance 2,725,000 2,487,000
=========== ===========
$ -- $ --
=========== ===========
23
<PAGE>
TRANSACT INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 -- INCOME TAXES (CONTINUED)
Due to the Company's cumulative losses, management does not consider
that enough support to overcome the "more likely than not" criteria existed to
record a deferred tax asset. As a result, for financial reporting purposes,
deferred tax assets are reduced by a valuation allowance.
At April 30, 1998, the Company has operating loss carryforwards and
investment tax credit carryforwards for tax return purposes of approximately
$7,100,000 and $2,000 respectively, expiring in 1999 through 2011.
NOTE 12 -- OTHER DATA
The Company paid $387,548, $780,465 and $148,702 during 1998, 1997 and
1996, respectively, to a subcontractor that is owned by a stockholder of the
Company for the manufacturing of equipment for certain projects. This
subcontractor has issued letters of credit on behalf of the Company in
connection with two contracts executed by the Company.
24
<PAGE>
TRANSACT INTERNATIONAL INC.
FORM 10-KSB
EXHIBIT LIST
3(i) Amended and Restated Certificate of Incorporation of Transact
International Inc. (10/19/83). This exhibit is incorporated by
reference to Exhibits 3.1 and 3.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended April 30, 1987 Commission File
No. 0-8422 (the "1987 10-K").
3(ii) The By-Laws of Transact International Inc. (formerly Gram Industries
Inc.). This exhibit is incorporated by reference to Exhibit 3.3 to
the 1987 10-K.
10.1 The 1978 Employee's Stock Option Plan. This exhibit is incorporated
by reference to Exhibit 10.1 to the 1987 10-K.
10.2 Transact International Inc. 401(k) Profit Sharing Plan. This exhibit
is incorporated by reference to Exhibit 3.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended April 30, 1992
Commission File No. 0-8422 (the "1992 10-K").
10.3 Transact International Inc. Money Purchase Pension Plan. This
exhibit is incorporated by reference to Exhibit 10.3 to the 1992
10-K.
10.4 Transact Employment Agreement, dated as of August 1, 1991 between
Transact International Inc. and Frank B. Carder. This exhibit is
incorporated by reference to Exhibit 10.4 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended April 30, 1995,
Commission File No. 0-8422 (the "1995 10-KSB").
10.5 Transact Employment Agreement, dated as of August 1, 1991 between
Transact International Inc. and Bruno S. Frassetto. this exhibit is
incorporated by reference to Exhibit 10.5 to the Company's 1995
10-KSB.
10.6 Transact Employment Agreement, dated as of June 24, 1991 between
Transact International Inc. and Axel Coelln. This exhibit is
incorporated by reference to Exhibit 10.6 to the Company's 1995
10-KSB.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<CASH> 53
<SECURITIES> 0
<RECEIVABLES> 701
<ALLOWANCES> 58
<INVENTORY> 209
<CURRENT-ASSETS> 1041
<PP&E> 302
<DEPRECIATION> 279
<TOTAL-ASSETS> 1065
<CURRENT-LIABILITIES> 2265
<BONDS> 0
<COMMON> 852
0
0
<OTHER-SE> (2051)
<TOTAL-LIABILITY-AND-EQUITY> 1065
<SALES> 3575
<TOTAL-REVENUES> 3575
<CGS> 3262
<TOTAL-COSTS> 1058
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> (803)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (803)
<EPS-PRIMARY> (13)
<EPS-DILUTED> (13)
</TABLE>
