FORM 10-QSB/A
Amendment No. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter period ended September 30, 1997
-- OR --
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 333-20709
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TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Exact Name of small business issuer as specified in its charter)
DELAWARE 13-3391820
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
22681/22687 Old Canal Road, Yorba Linda, CA 92687
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(Address of principal executive offices)
(714) 974-7676
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(Issuer's telephone number, including area code)
Former Address: 22700 Savi Ranch Parkway, Yorba Linda, CA 92657
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the registrant (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 periods that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes _X_ No __
The number of shares of common stock, $.01 par value, outstanding as of
November 12, 1997 was 598,734.
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INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Condensed consolidated Balance sheets -
September 30, 1997 and June 30, 1997 ............................. 3
Condensed consolidated Statements of income -
three months ended September 30, 1997 and 1996 ................... 4
Condensed consolidated Statements of cash flows -
three months ended September 30, 1997 and 1996 ................... 5
Notes to Condensed consolidated Financial Statements -
September 30, 1997 ............................................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .................... 9
PART II.
OTHER INFORMATION
Item 5. Other Information ................................................ 10
Item 6. Exhibits and Reports on Form 8-K ................................. 11
Signatures ....................................................... 12
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Transition Analysis Component Technology, Inc.
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
A S S E T S
September 30 June 30
1997 1997
---------------------
(unaudited)
(000's omitted)
---------------------
Current Assets
Cash ................................................ $ 124 $ 133
Accounts receivable, less reserves of
$5,000 and $5,000, respectively .................. 538 419
Prepaid expenses .................................... 30 11
------ ------
Total Current Assets ................................ 692 563
------ ------
Furniture and Equipment .................................. 590 500
Less accumulated depreciation and amortization ...... 346 310
------ ------
244 190
------ ------
Other Assets
Rent security deposits .............................. 80 --
Software development ................................ 65 --
Excess of cost over assets acquired ................. 56 --
------ ------
TOTAL ASSETS ............................................. $1,137 $ 753
====== ======
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
Current Liabilities
Accrued expenses .................................... $ 233 $ 321
Loan payable - bank ................................. 350 --
Deferred income ..................................... 63 80
------ ------
Total Current Liabilities ................................ 646 401
Stockholders' Equity
Common Stock, par value $.01 per share:
authorized 5,000,000 shares; issued
598,734 shares as of September 30, 1997
and 553,830 shares as of June 30, 1997 ........... 6 5
Additional paid-in capital .......................... 553 441
Retained earnings ................................... (68) (94)
------ ------
Total Stockholders' Equity ............................... 491 352
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............... $1,137 $ 753
====== ======
Note: The consolidated balance sheet at June 30, 1997 has been derived from the
audited consolidated financial statements at that date.
See notes to condensed consolidated financial statements.
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Transition Analysis Component Technology, Inc.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
September 30,
1997 1996
-------- -------
(000's omitted,
except per share data)
-----------------------
Revenues ......................................... $648 $527
Selling, general and administrative expenses ..... 600 395
Depreciation of equipment ....................... 11 7
Amortization of software development costs ....... 1 --
Interest expense ................................. 3 --
------- -------
Income before income taxes ....................... 33 125
Provision for income taxes ....................... 7 38
------- -------
Net income ....................................... $26 $87
======= =======
Net Income per Common Share ...................... $0.05 $0.16
======= =======
Number of shares used in computation ............. 568,798 553,830
See notes to condensed consolidated financial statements.
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Transition Analysis Component Technology, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
September 30,
1997 1996
---- ----
(000's omitted)
------------------
OPERATING ACTIVITIES
Net income .............................................. $ 26 $ 87
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization .................. 12 7
Changes in operating assets and liabilities:
Accounts receivable ........................ (31) (59)
Prepaid expenses and other current assets .. (19) (8)
Accrued expenses ........................... (48) 33
Deferred income ................................ (17) --
Rent security deposits ......................... (79) --
---- ----
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ..... (156) 60
---- ----
INVESTING ACTIVITIES
Costs related to RAC acquisition, net of cash received .. 12 --
Purchase of equipment ................................... (40) (28)
Additions to software development ....................... (5) --
---- ----
NET CASH USED IN INVESTING ACTIVITIES ........................ (33) (28)
---- ----
FINANCING ACTIVITIES
Proceeds from lines of credit ........................... 350 --
Net decrease in due to former parent .................... (170) (58)
---- ----
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES .......... 180 (58)
---- ----
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......... (9) (26)
Cash at beginning of period ............................. 133 134
---- ----
CASH AT END OF PERIOD ........................................ $124 $108
==== ====
See notes to condensed consolidated financial statements.
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Transition Analysis Component Technology, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1997
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principals for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month period
ended September 30, 1997 are not necessarily indicative of the results that may
be expected for the year ending June 30, 1998.
ORGANIZATION
Prior to June 30, 1997, Transition Analysis Component Technology, Inc.
("TACTech" or the "Company") was a 90% owned subsidiary of Zing Technologies,
Inc. ("Zing"), the Company's former parent, and the remaining 10% was owned by
one officer of the Company.
The Company filed a registration statement on Form SB-1, which became
effective June 30, 1997, for the purpose of distributing the Common Stock of the
Company which was owned by Zing to the shareholders of Zing (the
"Distribution"). In connection with the Distribution, the Common Stock
authorized and outstanding was split on approximately a 36.436-for-one basis.
Also, in connection with the Distribution, inter-company advances
(excluding income taxes) as of the effective date of the Distribution were
converted to equity and, accordingly, were included within additional paid-in
capital.
As of the date of the Distribution, the Company engaged certain employees
of Zing (with the permission of Zing) on a part-time basis to render to the
Company the following services for a cost not to exceed $100,000 per year
including: to advise in the development of the Company's business plan, to
advise the Company with respect to and to negotiate agreements on the Company's
behalf, to coordinate communications with the Company's stockholders, to advise
the Company with respect to and to negotiate acquisitions and financing, to
prepare and file the Company's tax returns and reports required by applicable
securities laws and rules of applicable stock exchanges, to review and supervise
the Company's accounting department and systems from time to time and suggest
revisions and changes thereto, and to perform such further services as such
employees may agree.
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Transition Analysis Component Technology, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
Acquisition of Research Analysis Corp.
On September 22, 1997, TACTech acquired the search and report software of
Research Analysis Corporation ("RAC") pursuant to a merger ( the "Merger") of
Research Technology Analysis Corp., a California corporation formed for this
purpose and wholly-owned by the Company with and into RAC. Upon consummation of
the Merger, RAC, as the surviving corporation, became a wholly-owned subsidiary
of the Company. The RAC acquisition was accounted for pursuant to the purchase
method of accounting and is effective as of September 1, 1997.
The following unaudited pro-forma information has been prepared assuming
that this acquisition had taken place at the beginning of the respective
quarters, after giving effect to pro-forma adjustments for compensation accruals
and income taxes:
Three months ended September 30,
1997 1996
---- ----
Revenue .................................. $756,076 $737,123
Net (Loss) Income ........................ ($4,851) $100,807
Net (Loss) Income per Common Share ....... ($0.01) $0.17
Historically, RAC derived revenues from consulting services and
customer-specific projects (other than those specifically related to
indenturing/component library services being developed by TACTech and known as
"TACTRAC"). Such non-TACTRAC related revenue was derived by RAC typically under
cost plus fixed fee contracts with the Department of Defense and government
contractors and related specifically to training services, engineering support
and logistics support. These contractual services dealt with issue of
reliability, maintainability, failure analysis, reliability predictions, circuit
card redesign, provisioning and weapons system file data extraction.
It is the intention of TACTech selectively to disengage from RAC's
non-TACTRAC related activity, redirect resources toward software development and
marketing, and increase TACTRAC subscription revenue. Thus, in the short term,
as TACTech develops the TACTRAC product, software development costs will in all
likelihood increase and may exceed RAC revenues. TACTech anticipates marketing
the TACTRAC product through TACTech (rather than RAC) channels. There can be no
assurance that TACTech will be able successfully to develop and market the
TACTRAC product and that such failure will not result in a material adverse
effect upon TACTech.
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Transition Analysis Component Technology, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
In Accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived assets for Long-Lived Assets to be Disposed of", the Company assesses
the recoverability of cost in excess of net assets acquired by determining
whether the amortization of the asset balance over its remaining life can be
recovered through the undiscounted future operating cash flows. The Company
believes that no impairment has occurred and that no reduction in the estimated
useful life is warranted.
Loan Payable - Bank
On August 28, 1997, the Company entered into a $1,500,000 revolving credit
facility with a commercial bank (the "Bank") to be used for working capital and
equipment acquisitions. The facility has a three year term and is guaranteed by
Zing. Interest on all borrowings is at a variable rate tied to the Bank's prime
rate. All of the Company's personal property collateralizes borrowings under
such facility.
Impact of New Accounting Standard
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, Earnings per Share, which specifies a change in the
computation, presentation and disclosure requirements for earnings per share and
requires the restatement of all prior periods. The Statement is required to be
adopted for periods ending after December 15, 1997. Accordingly, the Company
will comply with the requirements of this standard, however, the Company does
not expect that the impact of applying this standard will be material.
Stock-Based Compensation and Pro Forma Information
Under the provisions of FASB No. 123, the Company is required to disclose
the fair value, as defined, of options granted to employees and related
compensation expense. The fair value for these options is estimated at the date
of grant using a Black-Scholes option pricing model. The Black-Scholes option
valuation model was developed for use in estimating the fair value of traded
options which have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly subjective
assumptions including the expected stock price volatility. Because the Company's
employee stock options have characteristics significantly different from those
of traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its employee stock options.
The Company is also required to present pro forma information as if
provisions of FASB Statement No. 123 had been implemented as of the date of the
stock options were granted. For the year ended January 31, 1997. The disclosure
provisions of FASB Statement NO. 123 do not produce information that differs
materially from that contained in the consolidated financial statements.
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Transition Analysis Component Technology, Inc.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
The following table sets forth for the periods indicated the percentage
relationship to net sales of certain items from the statement of operations:
Percent of Net Sales
Three Months Ended September 30,
1997 1996
-------------- ---------------
Revenues ......................................... 100.0% 100.0%
Selling, general and administrative expenses ..... 92.6 75.0
Depreciation and amortization of equipment
and software development costs .............. 1.9 1.3
Interest expense ................................. .5 --
----- -----
Income before income taxes ....................... 5.0 23.7
Provision for income taxes ....................... 1.0 7.2
----- -----
Net income ..................................... 4.0 16.5
===== =====
RESULTS OF OPERATION - THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1996
TACTech generates revenues primarily through license agreements for its
data base services. These agreements are generally for terms of twelve months,
but may be canceled by either party upon 30 days notice. The number of
subscriber licenses generating revenues was greater by approximately 18% at
September 30, 1997 as compared to as at September 30, 1996.
Three Months Ended
September 30,
1997 1996
---- ----
Subscribers at beginning of period 95 73
Subscribers who did not renew (5) (3)
Subscribers added during period 3 9
--- ---
Subscribers at end of period 93 79
=== ===
The Company reported income of $26,000 or $.05 per share for the quarter
ended September 30, 1997, a decrease of 70% from the comparable 1996 quarter of
reported income of $87,000 or $.16 per share.
Revenues for the three months ended September 30, 1997 were $648,000
compared to revenues for the three months ended September 30, 1996 of $527,000.
Sales for TACTech increased 23% for the three months ended September 30,
1997 over the comparable 1996 quarter due principally to an increase of
approximately 18% in the subscription base and $40,000 of sales from Research
Analysis Corporation ("RAC"), a company acquired as of September 1, 1997.
Selling, general and administrative expenses increased as a percentage of
revenues to 93% for the three months
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Transition Analysis Component Technology, Inc.
RESULTS OF OPERATION - THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 1996 (continued)
ended September 30, 1997 compared to 75% for the comparable 1996 period.
Approximately $62,000, or 10% of selling, general and administrative expenses
were attributable to RAC. The balance of the increase in the selling, general
and administrative expenses was primarily due to increased personnel costs as
illustrated in the following table:
Number of Employees
Three Months Ended September 30,
1997 1996
---- ----
Sales, marketing, training and customer service 6 4
Software development, data base maintenance
and computer maintenance 20 9
Data Processing 3 3
General and administrative 9 4
-- --
38 20
== ==
The provision for income taxes decreased from $38,000 for the three months
ended September 30, 1996 to $7,000 for the three months ended September 30, 1997
primarily as a result of the decrease in income before taxes of $92,000.
The Company filed its federal income taxes on a consolidated basis for
fiscal year ended 1997 with its former parent, Zing. Income taxes were computed
on a separate company basis pursuant to the liability method.
The difference between the effective tax rate and the federal tax rate of
34% is due to the effect of the graduated federal tax rate schedule and state
taxes.
Liquidity and Capital Resources
For the three months ended September 30, 1996, the Company used most of its
cash generated from operations for the acquisition of computers and computer
related equipment and for the reduction of its obligations to its former parent
company, Zing. For the three months ended September 30, 1997, cash generated
from operations and from a line of credit was used to fund operations and to
purchase computers and related equipment, to liquidate all obligations to its
former parent company, Zing, and to pay costs related to the acquisition of RAC.
Based upon current and anticipated levels of operations and plans for
integrating the RAC business, the Company believes that is cash flow from
operations, combined with borrowings available under the existing line of
credit, will be sufficient to meet is current and anticipated cash operating
requirements, including scheduled interest and principal payments, capital
expenditures and working capital needs for the foreseeable future.
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Transition Analysis Component Technology, Inc.
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.
Transition Analysis Component Technology, Inc.
(Registrant)
Date January 7, 1998 /s/ Martin S. Fawer
----------------- -------------------
Martin S. Fawer, Treasurer
and Chief Financial Officer
Page 11
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