<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2000
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 0-10966
NATIONAL TRANSACTION NETWORK, INC.
(Exact name of Registrant as specified in its charter)
Delaware 75-1535237
(State of (I.R.S. Employer
Incorporation) Identification No.)
117 Flanders Road, Westborough, MA 01581
(Address of principal executive offices, including zip code)
(508) 870-3200
(Registrant's telephone number, including area code)
______________
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve 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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 11, 2000
----------------------------- ---------------------------
Common Stock, $0.15 par value 3,325,468 shares
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NATIONAL TRANSACTION NETWORK, INC.
Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 2000
Table of Contents
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<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION Number
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<S> <C> <C>
Item 1 Condensed Financial Statements (Unaudited):
Condensed Balance Sheets -
March 31, 2000 and December 31, 1999 3
Condensed Statements of Operations -
Three Months Ended March 31, 2000 and 1999 4
Condensed Statements of Cash Flows -
Three Months Ended March 31, 2000 and 1999 5
Notes to Condensed Financial Statements - March 31, 2000 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3 Quantitative and Qualitative Disclosure of Market Risk 8
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 8
SIGNATURES 9
INDEX OF EXHIBITS 10
</TABLE>
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- -----------------------------
NATIONAL TRANSACTION NETWORK, INC.
CONDENSED BALANCE SHEETS
(In Thousands of Dollars Except Per Share Data)
<TABLE>
<S> <C> <C>
March 31, December 31,
2000 1999
------------------- -------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 144 $ 64
Accounts receivable, net 224 627
Accounts receivable - stockholder 144 262
Prepaid expenses and other assets 40 49
-------- --------
Total current assets 552 1,002
Property and equipment, net 113 115
Capitalized software development costs, net 934 810
Purchased technology, net 177 193
Other assets 14 14
-------- --------
Total assets $ 1,790 $ 2,134
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 40 $ 26
Accounts payable - stockholder - 222
Accrued liabilities 202 234
Deferred revenue 169 163
Notes payable to stockholder 1,250 850
-------- --------
Total current liabilities 1,661 1,495
Convertible subordinated notes payable to stockholder 2,269 2,269
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Total liabilities 3,930 3,764
-------- --------
Stockholders' deficit
Preferred stock, $0.10 par value - -
Common stock, $0.15 par value 499 499
Additional paid-in capital 12,796 12,739
Accumulated deficit (15,435) (14,868)
-------- --------
Total stockholders' deficit (2,140) (1,630)
-------- --------
Total liabilities and stockholders' deficit $ 1,790 $ 2,134
-------- --------
</TABLE>
See notes to condensed financial statements
3
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NATIONAL TRANSACTION NETWORK, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In Thousands of Dollars Except For Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
2000 1999
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<S> <C> <C>
Revenue:
Systems and equipment $ - $ 416
Software and services 259 589
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Total revenue 259 1,005
Cost of revenue:
Systems and equipment - 317
Software and services 139 272
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Gross margin 120 416
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Expenses:
Selling, general and administrative 285 267
Research and development 331 179
Total expenses 616 446
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Loss from operations (496) (30)
Interest expense, net (71) (52)
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Net loss $ (567) $ (82)
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Basic and diluted loss per common share $(0.17) $(0.02)
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Weighted average number of shares outstanding (000's):
(basic and diluted) 3,325 3,325
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</TABLE>
See notes to condensed financial statements
4
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NATIONAL TRANSACTION NETWORK, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
2000 1999
------------- -----------
<S> <C> <C>
Operating activities:
Net loss $(567) $ (82)
Depreciation and amortization 86 37
Interest on convertible subordinated notes payable
to stockholder 57 52
Change in non-cash working capital 295 128
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Net cash provided by (used in) operating activities (129) 135
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Investing activities:
Purchases of property and equipment (16) (13)
Capitalized software development costs (175) (165)
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Net cash used in investing activities (191) (178)
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Financing activities:
Proceeds from notes payable to stockholder 400 -
Other - (1)
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Net cash provided by (used in) financing activities 400 (1)
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Net increase (decrease) in cash and cash equivalents 80 (44)
Cash and cash equivalents at beginning of period 64 225
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Cash and cash equivalents at end of period $ 144 $ 181
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</TABLE>
See notes to condensed financial statements
5
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NATIONAL TRANSACTION NETWORK, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Tabular amounts in thousands of dollars, except per share data)
(Unaudited)
March 31, 2000
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 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 our opinion, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. These
statements should be read in conjunction with our audited financial statements
for the year ended December 31, 1999. Operating results for the three months
ended March 31, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000 or any other interim period.
2. Net Loss Per Share
Net loss per share on a basic and diluted basis as required by Statement No. 128
is calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
2000 1999
------------ ----------
<S> <C> <C>
Net loss $ (567) $ (82)
Calculation of weighted average shares
outstanding plus assumed conversions (000's):
Weighted average basic shares outstanding 3,325 3,325
Effect of dilutive securities - -
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Weighted average diluted shares outstanding 3,325 3,325
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Basic and diluted loss per share $ (0.17) $ (0.02)
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</TABLE>
The effect of dilutive securities excludes those stock options and convertible
subordinated notes payable for which the impact would have been anti-dilutive.
All of these securities were anti-dilutive at March 31, 2000 and 1999.
3. Recent Accounting Pronouncement
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements", or SAB 101. SAB
101 summarizes certain of the SEC Staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements. Although
we are currently evaluating the impact of SAB 101, we believe that our current
practices comply with SAB 101. However, should we determine that a change in
accounting policy is necessary, such a change will be made prospectively in the
second quarter of 2000 and would result in a charge to results of operations for
the cumulative effect of the change. This amount, if recognized, would be
recorded as deferred revenue and recognized as revenue in future periods.
Financial statements for prior periods would not be restated.
6
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4. Subsequent Event
On May 4, 2000, IVI Checkmate Corp. received approval from the Securities and
Exchange Commission to proceed in its proposed acquisition of the remaining NTN
common shares that it does not already own. A special meeting of NTN
stockholders will be held on June 13, 2000 to approve the proposed transaction.
We anticipate that the proposed transaction will be completed at that time.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
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The following discussion contains forward-looking statements subject to the
safe harbor created by the Private Securities Litigation Reform Act of 1995. The
words "may," "would," "could," "will," "expect," "estimate," "anticipate,"
"believe," "intends," "plans" and similar expressions and variations thereof are
intended to identify forward-looking statements. We caution that these
statements represent projections and estimates of future performance and involve
certain risks and uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors including, without limitation, rapid and significant technological
developments that could delay the introduction of improvements in existing
products or of new products; dependence on any proprietary technologies (which
may be independently developed by competitors); potential fluctuation in
financial results as a result of any inability to make timely sales; competition
from existing companies as well as new market entrants; and other risk factors
that are contained in documents that we file with the U.S. Securities and
Exchange Commission.
Results of Operations - Three Months Ended March 31, 2000 Compared to Three
Months Ended March 31, 1999
The following table sets forth certain items derived from our condensed
statements of operations:
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------------------------------
2000 1999
---------------------------- ----------------------------
Amount % Amount %
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
(In thousands of dollars)
Revenue:
Systems and equipment $ - - % $ 416 41 %
Software and services 259 100 589 59
---------------------------- ----------------------------
Total revenue 259 100 1,005 100
Cost of revenue:
Systems and equipment - - 317 31
Software and services 139 54 272 27
---------------------------- ----------------------------
Gross margin 120 46 416 42
---------------------------- ----------------------------
Expenses:
Selling, general and administrative 285 110 267 18
Research and development 331 128 179 27
---------------------------- ----------------------------
Total expenses 616 238 446 45
---------------------------- ----------------------------
Loss from operations (496) (192) (30) (3)
Interest expense, net (71) (27) (52) (5)
---------------------------- ----------------------------
Net loss $(567) (219)% $ (82) (8)%
---------------------------- ----------------------------
</TABLE>
Any trends that may be derived from the above tables are not necessarily
indicative of our future operations.
7
<PAGE>
Revenue decreased to $259,000 for the three months ended March 31, 2000
from $1.0 million for the three months ended March 31, 1999. The significant
reduction in revenue was the result of an operating decision made in late 1999
to focus our limited resources to the development and sale of Mainsail software
products.
Cost of sales decreased in the three months ended March 31, 2000 to
$139,000 from $589,000 for the three months ended March 31, 1999 as a result of
a corresponding significant decrease in revenue. The absence of lower margined
hardware product sales in the first quarter of 2000, however, resulted in a
higher overall gross margin, which increased to 46% from 42% for the same
quarter one year ago.
Selling, general and administrative expenses remained steady for the three
months ended March 31, 2000 and 1999.
Research and development expenditures increased 85% to $331,000 for the
three months ended March 31, 2000 from $179,000 for the three months ended March
31, 1999, due to continued costs on Mainsail and related software development
costs.
Liquidity and Capital Resources
For the three months ended March 31, 2000, we borrowed $400,000 from IVI
Checkmate Corp. to fund our operations. Approximately $129,000 of our recent
borrowings was used in operating activities, while an additional $191,000 was to
finance purchases of property and equipment and for development of software
applications. The remaining balance of our funding increased our cash on hand at
March 31, 2000 to $144,000.
For the three months ended March 31, 2000, we continue our inability to
generate sufficient revenue to sustain operations as a stand-alone entity, and
continue to depend on financing from our parent company to fund operating costs.
As a result, there remains significant risk and uncertainty of our ability to
continue as a going concern.
Item 3. Quantitative and Qualitative Disclosure of Market Risk
------------------------------------------------------
There has been no material change during the quarter ended March 31, 2000,
from the disclosures about market risk provided in our Annual Report on Form 10-
K for the year ended December 31, 1999.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits. The following exhibits are filed as part of this report:
---------
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K.
--------------------
No report was filed during the three months ended March 31, 2000.
8
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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.
NATIONAL TRANSACTION NETWORK, INC.
(Registrant)
Date: May 11, 2000 /s/ L. Barry Thomson
-----------------------------------------
L. Barry Thomson
Chairman, President and Chief Executive
Officer
(Principal Executive Officer)
Date: May 11, 2000 /s/ L. Barry Thomson
-----------------------------------------
L. Barry Thomson
Chairman, President and Chief Executive
Officer
(Principal Financial and Accounting Officer)
9
<PAGE>
INDEX OF EXHIBITS
Exhibit
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No. Description
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27 Financial Data Schedule
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 144
<SECURITIES> 0
<RECEIVABLES> 264
<ALLOWANCES> 40
<INVENTORY> 0
<CURRENT-ASSETS> 552
<PP&E> 291
<DEPRECIATION> 178
<TOTAL-ASSETS> 1,790
<CURRENT-LIABILITIES> 1,661
<BONDS> 0
0
0
<COMMON> 499
<OTHER-SE> (2,639)
<TOTAL-LIABILITY-AND-EQUITY> 1,790
<SALES> 0
<TOTAL-REVENUES> 259
<CGS> 0
<TOTAL-COSTS> 139
<OTHER-EXPENSES> 616
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71
<INCOME-PRETAX> (567)
<INCOME-TAX> 0
<INCOME-CONTINUING> (567)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (567)
<EPS-BASIC> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
