<PAGE>
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 quarterly period ended October 31, 1998
[ ] 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 0-23903
-------
TRANSFORMATION PROCESSING INC.
(Exact name of small business issuer as specified in its charter)
Nevada 95-4583945
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5500 Explorer Drive, Suite 2000, Mississauga, Ontario L4W 5C7
(Address of principal executive offices)
(905) 206-1366
(Issuer's telephone number)
Not Applicable
- ------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if changed Since Last
Report)
Indicate by check mark 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 registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
YES X NO
-------- --------
As of December 17, 1998, the issuer had 18,100,915 shares of Common
Stock, par value $.001 per share, issued and outstanding.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Index to Financial Statements
THREE MONTHS ENDED OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Page
<S> <C>
Balance Sheet 3
Statements of Operations 4
Statements of Stockholders' Equity (Deficiency) 5
Statements of Cash Flows 6
Notes to Financial Statements 7
Financial Data Schedule S-1
</TABLE>
[INSERT FINANCIAL PAGES]
2
<PAGE>
TRANSFORMATION PROCESSING INC.
(a development stage company)
BALANCE SHEET
<TABLE>
<CAPTION>
October 31, 1998
<S> <C>
ASSETS
Current Assets:
Cash $ 115,888
Accounts receivable, net of allowance for doubtful accounts of $31,736 137,466
Due from related parties 14,261
Prepaid expenses and other current assets 16,486
-----------
Total current assets 284,101
Property and Equipment, net 190,267
Deferred debt cost, net 55,715
Other Assets 29,683
-----------
Total Assets $ 559,767
-----------
-----------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Accounts payable $ 413,639
Accrued expenses and other current liabilities 188,678
Current maturities of long term debt 48,035
-----------
Total current liabilities 650,352
Long term debt, net of current maturities 939,265
-----------
Total liabilities 1,589,617
-----------
-----------
Commitments and Contingencies
Stockholders' Deficiency
Preferred stock - $.001 par value; authorized 5,000,000 shares, none issued
Common stock - $.001 par value; authorized 50,000,000 shares
issued and oustanding 17,960,915 shares 17,961
Additional paid-in capital 6,832,963
Deficit accumulated during the development stage (7,812,254)
Cumulative foreign currency translation adjustments (68,520)
-----------
Stockholders' deficiency (1,029,850)
-----------
Total Liabilities and Stockholders' Deficiency $ 559,767
-----------
-----------
</TABLE>
See notes to financial statements
3
<PAGE>
TRANSFORMATION PROCESSING INC.
(a development stage company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three-month Three-month Cumulative amounts
Period ended Period ended from inception
October 31, 1997 October 31, 1998
<S> <C> <C> <C>
Revenue $ 88,820 $ 191,069 $ 1,115,584
------------ ------------ ------------
Expenses
Cost of consulting services 22,361 16,392 1,342,019
Cost of software transformation services 93,753 151,433 1,451,370
Software development 50,242 110,292 363,701
General and administrative 274,808 475,382 3,220,912
Noncash consulting costs -- -- 1,536,341
------------ ------------ ------------
Total Expenses 441,164 753,499 7,914,343
------------ ------------ ------------
Loss from operations (352,344) (562,430) (6,798,759)
Interest income (expense) net (487) (164,735) (1,013,495)
------------ ------------ ------------
Net loss $ (352,831) $ (727,165) $ (7,812,254)
------------ ------------ ------------
Net loss per common share $ (0.03) $ (0.04)
------------ ------------
Weighted average number of common shares outstanding 12,854,554 16,627,716
------------ ------------
</TABLE>
See notes to financial statements
4
<PAGE>
TRANSFORMATION PROCESSING INC.
(a development stage company)
STATEMENT OF STOCKHOLDERS' DEFICIENCY
Three month period ended October 31, 1998
<TABLE>
<CAPTION>
Deficit
Accumulated Foreign
Additional During the Currency Stock-
Common Stock Paid-in Development Translation holders'
Shares Amount Capital Stage Adjustments Deficiency
<S> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1998 16,186,628 $ 16,187 $ 6,266,719 $ (7,085,089) $ (33,851) $ (836,034)
---------- -------- ----------- ------------- ---------- -------------
Issuance of common stock
for cash - - - -
Issuance of common stock
upon conversion of
convertible debentures 1,774,287 1,774 437,844 439,618
Recognition of beneficial
conversion feature of
convertible debt 75,000 75,000
Warrants to purchase common
stock issued with convertible
debenture 53,400 53,400
Net loss (727,165) (727,165)
Cumulative foreign currency
translation adjustment (34,669) (34,669)
---------- -------- ----------- ------------- ---------- -------------
Balance at October 31, 1998 17,960,915 $ 17,961 $ 6,832,963 $ (7,812,254) $ (68,520) $ (1,029,850)
---------- -------- ----------- ------------- ---------- -------------
</TABLE>
See notes to financial statements
5
<PAGE>
TRANSFORMATION PROCESSING INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three-month Three-month Cumulative
Period ended Period ended amounts
October 31, 1997 October 31, 1998 from inception
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss from development stage operations ($ 352,831) ($ 727,165) ($7,812,254)
Adjustments to reconcile net loss from development stage operations
to net cash used in operating activities
Depreciation and amortization 54,821 11,464 826,398
Issuance of options and warrants to purchase common stock for services 0 53,400 262,305
Issuance of common stock for services in reverse acquisition 0 0 1,549,056
Recognition of beneficial conversion feature 0 75,000 706,281
Provision for doubtful accounts 0 0 34,325
Write-off of amounts due from related parties 0 0 96,020
Amortization of discounts 0 39,705 227,498
Interest expense converted to stock 0 14,618 7,085
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (22,438) 272,847 (193,645)
Decrease in time deposits 23,142 0 (961)
Increase in prepaid expenses and other current assets (19,396) (11,879) (19,944)
Increase in deferred debt costs 0 0 (60,263)
(Increase) decrease in other assets 4,638 3,312 (27,822)
Increase in accounts payable 80,609 70,827 443,996
Increase (decrease) in accrued expenses and other current liabilities (76,980) es (36,251) 212,294
----------- ----------- -----------
Net cash used in operating activities (308,435) (234,122) (3,749,631)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (47,640) (19,533) (266,867)
Purchase of intangible assets 0 0 (24,156)
Advances to related parties 0 0 (129,621)
----------- ----------- -----------
Cash used in investing activities (47,640) (19,533) (420,644)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from loan payable - bank 0 0 123,318
Repayments of loan payable - bank (8,972) (13,920) (85,840)
Repayments of note payable - stockholder (34,754) (36,676) (214,798)
Net proceeds from issuance of common stock 483,596 0 2,665,437
Net proceeds from issuance of convertible debentures 0 298,226 1,778,688
----------- ----------- -----------
Net cash provided by financing activities 439,870 247,630 4,266,805
----------- ----------- -----------
Effect of exchange rate changes on cash (4,340) 28,774 19,358
----------- ----------- -----------
Net increase (decrease) in cash 79,455 (34,799) 115,888
Cash at beginning of period 16,431 150,687 0
----------- ----------- -----------
Cash at end of period $ 95,886 $ 115,888 $ 115,888
----------- ----------- -----------
Supplemental Disclosure of Cash Flow information
cash paid during the period for interest $ 1,443 $ 1,738 $ 62,421
----------- ----------- -----------
Supplemental Schedule of Non Cash Financing Activity
Conversion of long term debt to common stock $ 439,618 $ 1,146,913
</TABLE>
See notes to financial statements
6
<PAGE>
TRANSFORMATION PROCESSING INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(The information pertaining to the three month periods ended October 31,
1998 and 1997 are unaudited)
1. BASIS OF PRESENTATION, EVENTS, AND REVERSE ACQUISITION
The financial statements of Transformation Processing Inc., ("the
Company") included herein have been prepared pursuant to generally
accepted accounting principles and have not been examined by
independent public accountants. In the opinion of management all
adjustments which are of a normal recurring nature necessary to present
fairly the results of operation have been made. Pursuant to Securities
and Exchange Commission ("SEC") rules and regulations, certain
information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from these statements unless
significant changes have taken place since the end of the most recent
fiscal year. The disclosure contained herein should be read in
conjunction with the financial statements and notes included in the
Company's audited financial statements for the period ended July 31,
1998. The results of operations for the three-month period ended
October 31, 1998 and the period ended October 31, 1997 are not
necessarily indicative of the results to be expected for the full year.
On August 20, 1996, Samuel Hamann Graphix, Inc. acquired all of the
outstanding common stock of Transformation Processing Inc. ("Ontario"),
a Canadian corporation. For accounting purposes the acquisition has
been treated as a recapitalization of Ontario with Ontario as the
acquirer (reverse acquisition). Samuel Hamann Graphix, Inc. changed its
name to Transformation Processing Inc. (the "Company"). In February
1998, Ontario merged into the Company. The accompanying financial
statements reflect this merger as if it had occurred on July 31, 1997.
Loss per share is based on the weighted-average number of shares of
common stock outstanding during the periods.
The Company's functional currency is the Canadian Dollar. Balance sheet
accounts are translated into U.S. dollars using current exchange rates
in effect at the balance sheet date and revenue and expense accounts
are translated using an average exchange rate for the period. The gains
and losses resulting from translation are included in stockholders
equity.
7
<PAGE>
2. STOCKHOLDERS' EQUITY
In August 1998, $50,000 of 6% convertible debentures were converted
into 108,898 shares of common stock. In September 1998, $150,000 of 6%
convertible debentures were converted into 394,118 shares of common
stock and in October 1998, $250,000 of 6% convertible debentures were
converted into 1,271,271 shares of common stock.
3. EQUITY TRANSACTIONS and SUBSEQUENT EVENTS
On September 22, 1998, the Company issued a $200,000 6% convertible
debenture, due September 21, 2000. This debenture is convertible to
common stock at 80% (eighty percent) of the five day average closing
ask price immediately proceeding the date of conversion. In addition,
the Company granted warrants to purchase 101,010 shares of common
stock at a purchase price of $.40 per share.
This debenture is convertible into common stock at 80% of the five-day
average closing ask price immediately preceding the date of conversion.
In connection with the issuance of debentures, the Company issued
warrants to purchase 87,720 shares of common stock. The fair value of
$39,800 allocated to the warrants is being amortized over the term of
the debenture.
On October 8, 1998, the Company issued a $100,000 6% convertible
debenture for cash, due October 7, 2000. This debenture is convertible
into common stock at 80% of the five-day average closing ask price
immediately preceding the date of conversion. In connection with the
issuance of debentures, the Company issued warrants to purchase 55,556
shares of common stock. The fair value of $13,600 allocated to the
warrants is being amortized over the term of the debenture.
On November 18, 1998, the Company issued for cash, a $200,000
6% Convertible Debenture due November 17, 2000. This debenture is
convertible to common stock at 80% (eighty percent) of the five day
average closing ask price immediately proceeding the date of
conversion. In addition, the Company granted warrants to purchase
101,010 shares of common stock at a purchase price of $.40 per share.
On the date of issuance of each convertible debenture, the Company
allocated a portion of the proceeds to the beneficial conversion
feature of the debenture which represented the intrinsic value of that
feature. That amount is calculated as the difference between the
conversion price and the fair value of the common stock into which the
debentures are convertible, multiplied by the number of shares into
which the debentures are convertible. The amount attributable to the
beneficial conversion feature, aggregating $75,000, is included in
interest expense in the accompanying statement of operations as the
debentures became convertible into common stock on issuance.
4. COMMITMENTS
The Company entered into an agreement with Martin E. Janis & Company
("Janis") to provide the Company with public and investor relations
services. Under the terms of the agreement, the Company will grant
Janis 150,000 common shares of the Company as compensation for services
that had not been provided as of October 30, 1998. The common stock
will be restricted under Rule 144 of the Securities Act.
5. SETTLEMENT LIABILITY
The Company reached an out of court settlement with IBS Conversions,
Inc. ("IBS") concerning an outstanding lawsuit filed by IBS with the
district court of Illinois. The Settlement Agreement called for the
payment of approximately $90,000 to IBS
8
<PAGE>
over a period of six months. In return, the Company received the full
release of IBS. The Company agreed to pay $30,000 on June 26, 1998 and,
$12,000 on the 26th of each consecutive month until fully paid.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis should be read in conjunction with the
Company's first quarter ended unaudited financial statements and notes
thereto dated October 31, 1998 and 1997 and cumulative results from April 1,
1996 (date of incorporation), to October 31, 1998.
FINANCIAL CONDITION
The following is a discussion of the material changes in financial condition
from July 31, 1998 to October 31, 1998.
Current assets at October 31, 1998 were $284,101 as compared to $589,930 at
July 31, 1998. The basis for this decrease in current assets is as follows.
Accounts receivable totaled $137,466 at October 31, 1998 as compared to
$419,933 at July 31. The decrease was the result of the Company's aggressive
collection of outstanding receivables as of the year end and a softening of
revenue generation in the quarter.
The Company recorded material changes to Accounts payable and Accrued
expenses. Accounts payable at October 31, 1998 was $413,639 as compared to
$350,890 at July 31, 1998. Accrued expenses were $188,678 at October 31, 1998
as compared to $230,201 at July 31, 1998. These increases are due to the
Company's management of available cash resources and expansion of the
business.
The Company issued convertible debentures for cash in the quarter ended
October 31, 1998. The company recorded Convertible debt totaling $300,000 for
the period. The debt is convertible to shares in the Company and, will not
require the outlay of cash in coming periods. Details on the convertible
debentures are outlined in the Notes to the Financial Statements.
Additional paid-in capital at October 31, 1998 was $6,832,963 as compared to
$6,266,719 at July 31, 1998. The increase in paid-in capital for the period
was the result of the issuance of convertible debentures for cash in the
amount of $437,844, the discount related to the issuance of convertible
debentures totaling $75,000, and the fair value of stock options related to
the issuance of convertible debentures totaling $53,400.
Deficit accumulated during the development stage totaled $(7,812,254) as
compared to $(3,137,367) at October 31, 1997. The discussion of losses
incurred for the periods are outlined in the Results of Operations below.
9
<PAGE>
RESULTS OF OPERATIONS
The following is a discussion of the material change in results of operations
for the three-month periods ending October 31, 1998 and 1997.
NET LOSSES
For the quarters ended October 31, 1998 and 1997, the Company incurred net
losses of $727,165 and $352,831, respectively. Cumulative losses from April
1, 1996 to October 31, 1998, the Development period, totaled $7,812,254.
Explanations of these results are set forth below. The Company expects to
continue to incur operating losses until such time, if ever, that it may
generate adequate revenues from its ongoing services.
REVENUE
For the quarter ended October 31, 1998 the Company recorded revenue of $191,069
as compared to $88,820 for the quarter ended October 31, 1997. Conversion
Services, the Company's core business accounted for $39,558 of gross revenue for
the three-month period ended October 31, 1998, as compared to $17,208 for the
same period in 1997. GroupWare accounted for $83,390 of gross revenue for the
three-month period ended October 31, 1998, as compared to $41,110 for the same
period in 1997. Year 2000 accounted for $90,276 of gross revenue for the three
month period ended October 31, 1998 as compared to $0 for the same period in
1997.
The Company expects to generate revenue from (a) the sale of (i) transformation
services for end-users of IBM midrange computing systems and software
development services related to client/server migration; (ii) Year 2000
consulting, analysis, remediation and training services; and (iii) GroupWare
services, consisting primarily of the performance of application software
development services relating to Lotus Notes and ICC products and related
instructional services; and (b) the licensing of the Company's proprietary
software and third party proprietary software products. The Company is not able
to project the amount or proportion of revenue expected to be received from each
of the foregoing activities as the Company has not offered each of its services
for a sufficient period of time to have such knowledge.
In the autumn of 1996, the Company positioned itself to market transformation
services utilizing the Company's client/server migration software, targeting the
IBM mid-range computer market. In this regard, the Company planned to enhance
its client/server migration software in the 1997 and 1998 Fiscal Periods. Such
plan received less attention during such period as the Company shifted its
attention to the opportunity presented by the demand for the Year 2000
remediation services. Significant revenues have not materialized to date
however, the Company expects that expenditures by users of information
technology to fix their Year 2000 problem will escalate. The Company has
expanded its marketing and sales efforts to promoting Year 2000 services in both
the information technology field and embedded systems. The Company has
negotiated relationships with vendors of Year 2000 software tools. In mid 1997,
the Company was offering Year 2000 services. The Company continues to market
migration solution and Groupware relationship management software. The Company
has entered into agreements with Canadian and United States sales
10
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representation companies to implement the Company's marketing and sales
strategies. Currently, the Company is bidding on Year 2000 remediation projects
software conversion projects and Groupware implementations ranging in size from
$100,000 to $1,000,000. There can be no assurance that the Company will enter
into any firm contracts with respect to any of such projects.
EXPENSES
The Company is in the development stage and since April 1, 1996 has incurred
costs relating to the start up of operations. These costs consist of but are not
limited to raising capital, establishing a facility, recruiting personnel,
acquiring and installing furniture and equipment, acquiring development and
accounting software, developing its client/server migration software and
marketing and sales efforts.
For the quarters ended October 31, 1998, October 31, 1997, cost of consulting
services accounted for $16,392 and $22,361, respectively. Cumulatively, the cost
of consulting services accounted for $1,342,019. The Company anticipates managed
growth in this area as people are added to satisfy consulting services provided
by the Company. As the employment market becomes more competitive as the result
of channeling human resources toward the Year 2000 problem, the Company expects
to pay a premium for skilled consultants and engineers. These consulting
services will be allocated to projects in which the Company has signed
contracts.
Cost of software transformation services accounted for $151,433 of total
expenses for the quarter ended October 31, 1998. Comparatively, the Company
spent $93,753 for the same quarter ended October 31, 1997 and, has spent
$1,451,370 cumulatively in the development stage. The Company anticipates
adding people to this area by the fiscal year ending July 31, 1999, but, only
if contracts are in hand. This growth will depend on the volume of conversion
services and year 2000 scan and repair services provided to our customers.
Software development accounted for $110,292 of total expenses for the quarter
ended October 31, 1998. Comparatively, the Company spent $50,242 for the same
quarter in 1997 and, has spent $363,701 cumulatively in the development stage.
The increases in costs of product development are expected to continue as the
Company expands its product offerings.
General and administrative expense accounted for $475,382 of expenses for the
quarter ended October 31, 1998. Comparatively, the Company spent $274,808 for
the same quarter in 1997 and, has spent $3,220,912 cumulatively in the
development stage. The Company's general and administrative expenses
consisted primarily of salaries, rent, consulting fees, advertising and legal
costs associated with running a publicly traded company.
Cost of Consulting Services, Conversion Services and Product Development
11
<PAGE>
The Company's variable costs of software consulting, translation services and
development are in a direct relation to the volume of sales and anticipated
revenues. As a percentage of revenue, these costs will vary depending on the
nature of the sale and the product mix required to satisfy customer needs. Sales
based on mature product will yield a higher margin while specific project type
environments may call for a higher degree of manpower and travel costs.
The Company will continue product development of the core software product to
enable the company to broaden its impact on many vendor environments. The
development of translators to translate application code from any type of
machine language to virtually any target platform will serve as the benchmark of
the Company to respond effectively to end user requirements. The key to this
objective is a responsive, knowledgeable development team.
General and administrative
General and administrative costs consist of management and administrative staff,
professional services, office and occupancy costs. Significant costs are
attributed to the Company becoming a public company. This status will increase
audit and legal costs significantly. In relation to the Company becoming a
public company, the cost of corporate relations will also increase as quarterly
reports and other investor information is required. The Company anticipates that
its General and Administrative costs (as a percentage of costs) will decline as
the Company's operations expand.
Liquidity and Capital Resources
The Company has funded its activities through October 31, 1998 primarily from
the net proceeds of private placement of its securities and, to a lesser extent,
from cash flow from operations and the proceeds of two bank loans. The
outstanding principal balance of the bank loans are approximately $37,950 and
the loans bear interest at an annual rate equal to 2.5% over the bank prime rate
of interest in effect from time to time. Repayment of the loans, together with
interest thereon, is secured by a lien on substantially all of the fixed assets
of the Company and the personal guarantees of the Company's executive officers
and directors.
At October 31, 1998, the Company had a deficit accumulated during the
development stage of ($7,812,254), current assets of $284,101 and current
liabilities of $650,352. During the three-month period ended October 31, 1998,
the Company entered into a convertible debenture with Thomson Kernaghan a
registered broker dealer. The convertible debt will require the issuance of
common stock at date of conversion, not cash resources of the Company.
Otherwise, the Company did not incur any additional long-term debt. The company
has funded its activities to October 31, 1998 primarily through private
placements of securities and the issuance of convertible debentures. The Company
will continue to raise
12
<PAGE>
capital through these vehicles to fund operating activities and other capital
requirements. Failure to obtain such equity capital could have a material
adverse impact on the Company's ability to expand its operations. There can be
no assurance that equity capital will be available to the Company on acceptable
terms or at all.
In addition, implementation of the Company's business plan will require capital
resources substantially greater than those currently available to the Company.
The company may determine, depending on the opportunities available to it, to
seek additional debt or equity financing to fund the cost of continuing
expansion. To the extent that the Company finances expansion through the
issuance of additional equity securities, any such issuance would result in
dilution of the interests of the Company's stockholders. Additionally, to the
extent that the Company incurs indebtedness or issues debt securities to finance
expansion activities, it will be subject to all of the risks associated with
incurring substantial indebtedness, including the risks that interest rates may
fluctuate and cash flow may be insufficient to pay the principal of, and
interest on, any such indebtedness.
The Company has no current arrangements with respect to, or sources of,
additional financing, and it is not contemplated that its existing stockholders
will provide any portion of the Company's future financing requirements. There
can be no assurance that any additional financing will be available to the
Company on acceptable terms, or at all. The inability of the Company to obtain
financing when needed will have a material adverse effect on the Company,
including possibly requiring the Company to significantly curtail or cease its
operations.
Inflation
The Company believes that the impact of inflation and changing prices on its
operations since commencement of operations has been negligible.
PART II- OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
(C) On September 22, 1998 the Registrant sold to Fetu Holdings 6% convertible
debentures due September 21, 2000 in the aggregate principal amount of $200,000.
Warrants to purchase 87,720 shares of Common Stock exercisable at the price of
$.456 through September 21, 2000, were also issued. The debentures and warrants
were issued in reliance upon the exemption from registration provided by Section
4(2) of the Act and Rule 506 of Regulation D.
On October 8, 1998, the Registrant sold 6% Convertible Debentures, due
October 7, 2000, in the aggregate principal amount of $100,000 and issued
warrants to purchase
13
<PAGE>
55,556 shares of Common Stock for gross proceeds of $100,000 to: Canadian
Advantage LP ($25,000); Dominion Capital Fund ($25,000); Fetu Holdings
($25,000); and Advantage Bermuda Fund ($25,000). Each of the above were also
issued warrants to purchase 13,889 shares of Common Stock at $.36 per share
through October 6, 2000.
On November 18, 1998, the Registrant sold 6% Convertible Debentures,
due November 17, 2000, in the aggregate principal amount of $200,000 and issued
warrants to purchase 101,010 shares of Common Stock for gross proceeds of
$200,000 to: Canadian Advantage LP ($50,000); Dominion Capital Fund ($50,000);
Fetu Holdings ($50,000); and Advantage Bermuda Fund ($50,000). Each of the above
were also issued warrants to purchase 25,252 shares of Common Stock at $.396 per
share through November 18, 2000.
The Debentures, the warrants and the Common Stock issued on conversion
of the Debentures were issued in reliance upon the exemption set forth in
Sections 4(2) of the Act and Rule 506 thereunder. Such securities were purchased
for investment and not with a view to the public distribution thereof. The
Common Stock issued upon conversion of the Debentures were further issued in
reliance on Section 3(a)(9) of the Act. In both the issuance of the Debentures
and the Common Stock the certificates representing such securities bear a legend
preventing resale in the absence of registration with the Commission or an
exemption therefrom.
Item 6. Exhibits and Reports on Form 8-K
[a] Financial Data Schedule
[b] Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the three-month
period ended October 31, 1998.
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TRANSFORMATION PROCESSING INC.
Date December 21, 1998 /s/ Gary G. McCann
------------------------------- ------------------
Gary G. McCann, Chief Financial and
Accounting Officer
14
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheet and Statement of Operations filed as a part of the report on
Form 10-KSB for the quarter ended October 31, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> OCT-31-1998
<CASH> 115,888
<SECURITIES> 0
<RECEIVABLES> 183,463
<ALLOWANCES> 31,735
<INVENTORY> 0
<CURRENT-ASSETS> 284,101
<PP&E> 245,915
<DEPRECIATION> 58,636
<TOTAL-ASSETS> 559,767
<CURRENT-LIABILITIES> 650,352
<BONDS> 939,265
0
0
<COMMON> 17,961
<OTHER-SE> (1,047,811)
<TOTAL-LIABILITY-AND-EQUITY> 559,767
<SALES> 0
<TOTAL-REVENUES> 191,069
<CGS> 0
<TOTAL-COSTS> 753,499
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (164,753)
<INCOME-PRETAX> (727,165)
<INCOME-TAX> 0
<INCOME-CONTINUING> (727,165)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (727,165)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
