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 ended January 31, 1999
[ ] 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
TRANSACT INTERNATIONAL INC.
- --------------------------------------------------------------------------------
(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
---------------------------
(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 February 16, 1999 was 6,123,235.
Transitional Small Business Disclosure Format YES [ ] NO [X]
<PAGE>
TRANSACT INTERNATIONAL INC.
FORM 10-QSB - QUARTER ENDED JANUARY 31, 1999
INDEX
Page
----
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets
January 31, 1999 (Unaudited) and April 30, 1998 3
Statements of Operations (Unaudited)
Three and Nine Months Ended January 31, 1999
and January 31, 1998 4
Statements of Cash Flows (Unaudited)
Nine Months Ended January 31, 1998 and January 31, 1998 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 6 Exhibits and Reports on Form 8-K 9
SIGNATURE 10
2
<PAGE>
PART I : FINANCIAL INFORMATION
------------------------------
TRANSACT INTERNATIONAL INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1999 1998
----------- -----------
ASSETS (UNAUDITED)
CURRENT ASSETS
<S> <C> <C>
Cash $ (3,243) $ 53,307
Accounts receivable, net of allowance for doubtful
accounts of $50,000 and $58,000, respectively 425,552 643,109
Inventories 108,789 209,121
Costs and estimated earnings in excess of billings on
incomplete contracts 120,521 114,602
Prepaid expenses and other current assets -- 20,382
----------- -----------
TOTAL CURRENT ASSETS 651,619 1,040,521
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, AT COST 304,782 301,628
Less accumulated depreciation 288,630 (278,677)
----------- -----------
16,152 22,951
OTHER ASSETS 2,300 2,300
=========== ===========
TOTAL ASSETS $ 670,071 $ 1,065,772
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Bank borrowings $ 6,250 $ 56,250
Notes payable to stockholders 80,509 85,000
Note payable 50,000 --
Trade accounts and notes payable 1,493,642 1,328,721
Accrued expenses 405,863 354,065
Current portion of long-term debt 23,657 23,657
Billings in excess of costs and estimated earnings on
incomplete contracts 173,944 417,807
----------- -----------
TOTAL CURRENT LIABILITIES 2,233,865 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, issued 6,201,735 852,541 852,541
Additional paid-in capital 5,224,726 5,224,726
Treasury stock, at cost : 78,500 shares (29,606) (29,606)
Deficit (7,611,455) (7,247,389)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIENCY (1,563,794) (1,199,728)
=========== ===========
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIENCY $ 670,071 $ 1,065,772
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE>
TRANSACT INTERNATIONAL INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
1/31/99 1/31/98 1/31/99 1/31/98
----------- ----------- ----------- -----------
REVENUE:
<S> <C> <C> <C> <C>
Net sales $ 168,563 $ 613,566 $ 1,263,047 $ 2,848,248
Licensing fees 80,000 -- 480,000 --
----------- ----------- ----------- -----------
Total revenue 248,563 613,566 1,743,047 2,848,248
COSTS AND EXPENSES :
Cost of sales 211,930 654,533 1,326,244 2,634,155
Selling and administrative 211,521 266,165 757,653 876,704
----------- ----------- ----------- -----------
423,451 920,698 2,083,897 3,510,859
----------- ----------- ----------- -----------
(LOSS) INCOME FROM OPERATIONS (174,888) (307,132) (340,850) (662,611)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE) :
Interest expense (7,239) (4,202) (23,216) (15,431)
Other income 226 355 -- 2,859
----------- ----------- ----------- -----------
(7,013) (3,847) (23,216) (12,572)
=========== =========== =========== ===========
NET (LOSS) INCOME $ (181,901) $ (310,979) $ (364,066) $ (675,183)
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE OF
COMMON STOCK - BASIC AND DILUTED $ (0.03) $ (0.05) $ (0.06) $ (0.11)
=========== =========== =========== ===========
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>
NINE MONTHS ENDED
1/31/99 1/31/98
--------- ---------
OPERATING ACTIVITIES :
<S> <C> <C>
Net income (loss) $(364,066) $(675,183)
Adjustments to reconcile net income (loss) to cash (used in)
provided by operations:
Depreciation of property, plant and equipment 9,953 19,427
Changes in assets and liabilities :
Decrease (increase) in accounts receivable 217,557 (160,177)
Decrease in inventories 100,332 75,037
Decrease in other current assets 20,382 16,654
(Increase) decrease in costs and estimated earnings in
excess of billings on incomplete contracts - net (249,782) 365,077
Increase in accounts payable and accrued expenses 216,719 277,514
--------- ---------
NET CASH (USED IN) OPERATIONS (48,905) (81,651)
--------- ---------
INVESTING ACTIVITIES :
Capital expenditures (3,154) (7,331)
--------- ---------
FINANCING ACTIVITIES :
Proceeds from stockholder loan 65,509 100,000
Repayment of debt (70,000) (94,414)
--------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (4,491) 5,586
--------- ---------
NET DECREASE IN CASH (56,550) (83,396)
CASH, BEGINNING OF PERIOD 53,307 85,370
--------- ---------
CASH, END OF PERIOD $ (3,243) $ 1,974
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION :
Cash paid during the period for:
Interest $ 2,465 $ 15,431
</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 $1,563,794 and
$1,582,246, respectively, at January 31, 1999. A number of suppliers are
requiring the Company to pay on or before delivery of parts, services and
equipment. The Company's sales backlog is $3.0 million at January 31, 1999
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 January 31, 1999, the statements of operations for
the three and nine months ended January 31, 1999 and 1998 and the
statements of cash flows for the nine months ended January 31, 1999 and
1998 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 January 31, 1999 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 nine month periods
ended January 31, 1999 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.
4. The Company received a $50,000 loan from an individual who is working with
the Company to promote marine container handling. This loan is
collateralized by substantially all of the assets of the Company.
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.
The final installment of $6,250 plus interest was paid in March 1999.
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 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. The Company has no
outstanding stock options.
6. There was no benefit for income taxes in the three and nine month periods
ended January 31, 1999 and 1998, as the loss generated cannot be carried
back to offset income in prior years.
The Company has operating loss carryovers and investment tax credit
carryforwards for tax return purposes of approximately $7,200,000 and
$2,000 respectively, expiring in 1999 through 2011.
The tax effects of temporary differences giving rise to the Company's
deferred tax assets at January 31, 1999 are approximately as follows :
Net operating loss carryforward $ 2,800,000
Investment tax credit carryforward 2,000
Other reserves and liabilities 83,000
------------
2,885,000
Valuation allowance 2,885,000
------------
$ ---
============
Due to the Company's cumulative losses, management does not consider that
enough support to overcome the "more likely than not" criteria existed at
January 31, 1999 to record a deferred tax asset. As a result, for financial
reporting purposes, deferred tax assets are fully reduced by a valuation
allowance.
8
<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 nine months ended January 31,
1999 of $181,901 and $364,066, respectively. The losses result primarily from
the decrease in sales for the three and nine months ended January 31, 1999 of
$445,003 (72%) and $1,585,201 (56%), respectively from the comparable periods
the prior year. Sales of transfer balls decreased, in fiscal 1999 from fiscal
1998, approximately $30,000 and $530,000 for the three and nine months ended
January 31, 1999, respectively. Sales from terminal equipment decreased, in
fiscal 1999 from fiscal 1998, approximately $266,000 and $1,000,000 for the
three and nine months ended January 31, 1999, respectively. Gross (loss) profit
percentages, excluding licensing fees, for the three and nine months ended
January 31, 1999 and1998 were (25%), (8%), (7%) and 7%, respectively. The
decline in gross profits percentages in 1999 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 fiscal 1998 with less
sales in fiscal 1999 and small cost overruns on projects in 1999.
For the three and nine months ended January 31, 1999 the Company selling and
administrative expenses decreased $54,644 and $119,051. The third quarter
decrease was due primarily to a decrease in officers salaries. The reduction for
the nine months ended January 31, 1999 compared to January 31, 1998 was
primarily in officers salaries and professional fees.
The Company's sales backlog as of January 31, 1999 is approximately $3 million.
The backlog at January 31, 1998 was $2.8 million.
LIQUIDITY AND CAPITAL RESOURCES:
During the nine months ended January 31, 1999, the Company used approximately
$48,900 of cash in its operations, primarily resulting from the net loss net of
a decrease in accounts receivable and inventory. At January 31, 1999 the Company
has a working capital deficiency of $1,582,246.
The Company's ability to continue in business is dependent upon its ability to
become profitable and/or sell or license certain product lines in the immediate
future. At January 31, 1999 the Company's financial condition is very weak and
its resources limited. There is no assurance that the Company will be successful
in attaining additional profitable orders or in selling or licensing certain
product lines.
9
<PAGE>
PART II: OTHER INFORMATION
--------------------------
TRANSACT INTERNATIONAL INC.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits - 27 - Financial Data Schedule
(b) Reports on Form 8-K - None
10
<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: March 23, 1999 /S/ BRUNO S. FRASSETTO
- -------------------- -----------------------------------
BRUNO S. FRASSETTO
President and Acting Chief
Financial and Accounting Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JAN-31-1999
<CASH> (3)
<SECURITIES> 0
<RECEIVABLES> 476
<ALLOWANCES> (50)
<INVENTORY> 109
<CURRENT-ASSETS> 651
<PP&E> 305
<DEPRECIATION> 289
<TOTAL-ASSETS> 670
<CURRENT-LIABILITIES> 2,234
<BONDS> 0
<COMMON> 852
0
0
<OTHER-SE> 2,416
<TOTAL-LIABILITY-AND-EQUITY> 670
<SALES> 1,263
<TOTAL-REVENUES> 1,743
<CGS> 1,326
<TOTAL-COSTS> 1,326
<OTHER-EXPENSES> 758
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23
<INCOME-PRETAX> (364)
<INCOME-TAX> 0
<INCOME-CONTINUING> (364)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (364)
<EPS-BASIC> (.06)
<EPS-DILUTED> (.06)
</TABLE>
