FORM 10-QSB
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 Quarter Ended June 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: 2-96392-A
TRIANGLE IMAGING GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
Florida 59-2493183
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
4400 West Sample Road, Coconut Creek, Florida 33073
(Address of Principal Executive Office) (Zip Code)
954-968-2080
(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 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
The number of shares of registrant's Common Stock, $.001 par value, outstanding
as of June 30, 1997 was 8,949,665 shares.
<PAGE>
TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARY
INDEX
Page
Number
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheet - June 30, 1997.............................. 1
Consolidated Statement of Operations - For the Six Months
and Three Months Ended June 30, 1997 and 1996........................... 2
Consolidated Statement of Cash Flows - For the Six Months Ended
June 30, 1997 and 1996.................................................. 3
Notes to Financial Statements........................................... 4-6
Item 2. Management's Discussion and Analysis........................... 7-8
PART II - OTHER INFORMATION............................................... 9
SIGNATURES................................................................ 10
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
June 30,
1997
------------------
CURRENT ASSETS:
Cash and cash equivalents $ 592,450
Accounts receivable, net of allowance for doubtful
accounts of $128,000 616,927
Prepaid expenses 8,549
------------------
TOTAL CURRENT ASSETS 1,217,926
EQUIPMENT 207,924
GOODWILL 1,862,266
OTHER ASSETS 36,152
------------------
$ 3,324,268
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 538,554
Deferred revenue 330,548
Due to stockholders 50,000
Current portion of note payable 300,000
------------------
TOTAL CURRENT LIABILITIES 1,219,102
NOTE PAYABLE 1,250,000
MINORITY INTEREST 250,293
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par, 1,000,000 shares authorized:
Class A, 10,000 shares issued and outstanding 10,000
Common stock, $.001 par value,
authorized 50,000,000 shares: 8,949,665
issued and outstanding 8,950
Additional paid-in capital 3,247,761
Accumulated deficit (1,600,328)
Stock subscription receivable (876,250)
Deferred compensation (185,260)
------------------
TOTAL STOCKHOLDERS' EQUITY 604,873
------------------
$ 3,324,268
==================
See notes to financial statements.
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TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
----------------------------------- ------------------------------------
1997 1996 1997 1996
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
SALES $ 1,477,737 $ - $ 2,588,958 $ -
COST OF SALES 381,087 - 625,142 -
---------------- ---------------- ---------------- ----------------
GROSS PROFIT 1,096,650 - 1,963,816 -
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 774,244 4,349 1,468,835 9,796
NON-CASH IMPUTED COMPENSATION EXPENSE 28,045 - 41,420 13,250
AMORTIZATION OF GOODWILL 24,106 - 48,212 -
---------------- ---------------- ---------------- ----------------
INCOME (LOSS) FROM OPERATIONS 270,255 (4,349) 405,349 (23,046)
INTEREST EXPENSE 33,298 - 52,784 -
---------------- ---------------- ---------------- ----------------
INCOME (LOSS) BEFORE MINORITY INTEREST 236,957 (4,349) 352,565 (23,046)
MINORITY INTEREST 46,762 - 72,903 -
---------------- ---------------- ---------------- ----------------
NET INCOME (LOSS) $ 190,195 $ (4,349) $ 279,662 $ (23,046)
================ ================ ================ ================
NET INCOME PER SHARE $ 0.0 $ (0.0) $ 0.04 $ (0.01)
================ ================ ================ ================
WEIGHTED AVERAGE SHARES OUTSTANDING 8,801,415 3,757,165 7,167,373 3,668,831
================ ================ ================ ================
</TABLE>
See notes to financial statements.
-2-
<PAGE>
TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARY
STATEMENT OF CASH FLOWS
(Unaudited)
Six months ended
June 30,
-------------------------
1997 1996
--------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 279,662 $ (23,046)
Adjustment to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 50,511 -
Amortization of goodwill 48,212 -
Non-cash imputed compensation 23,670 13,250
Minority interest 72,903 -
Changes in assets and liabilities:
Increase in accounts receivable (247,059) -
Decrease in prepaid expenses 22,726 -
Increase in other assets (32,055) -
Increase in accounts payable and accrued expenses 267,379 8,779
Decrease in deferred revenue (16,655) -
----------- ----------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 469,294 (1,017)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (44,858) -
------ ---------
CASH USED IN INVESTING ACTIVITIES (44,858) -
------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of note payable (50,000) -
Proceeds from sale of common stock 250,750 -
Purchase of treasury stock (233,000)
------- ---------
CASH PROVIDED BY FINANCING ACTIVITIES (32,250) -
------- ---------
NET INCREASE (DECREASE) IN CASH 392,186 (1,017)
CASH - BEGINNING OF PERIOD 200,264 1,371
-------- ---------
CASH - END OF PERIOD $ 592,450 $ 354
======== ========
See notes to financial statements.
-3-
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TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying financial statements reflect all adjustments
which, in the opinion of management, are necessary for a fair
presentation of the financial position for the interim periods
presented.
Certain financial information which is normally included in
financial statements prepared in accordance with generally accepted
accounting principles, but which is not required for interim reporting
purposes has been condensed or omitted. The accompanying financial
statements should be read in conjunction with the financial statements
and notes thereto as of December 31, 1996 contained in the Company's
Annual Report on Form 10- KSB.
2. EARNING (LOSS) PER SHARE
Per share information is computed based on the weighted
average number of shares outstanding during the period.
3. NON-CASH IMPUTED COMPENSATION EXPENSE
A total of 35,500 shares of common stock were issued for
services during the quarter ended June 30, 1997. Such shares have been
valued at their fair market value on the date of issuance resulting in
a non-cash charge to income of $17,750.
4. ACQUISITION
On December 2, 1996, 95% of the stock of Engineered Business
Systems, Inc. ("EBS") was acquired by the Company for $896,000 in cash,
a note payable to EBS's shareholders for $1,600,000 and 500,000
restricted shares of the Company's common stock with certain piggy back
registration rights and restrictions. EBS's shareholders also have
certain anti-dilution provisions and selling rights tied to the
President's personal stock holdings, which expire upon the earlier of
the a) registration of the restricted shares and the payment of all
obligations to the EBS shareholders or b) on January 2, 2000 and
payment of all obligations to EBS's shareholders. The acquisition of
EBS has been accounted for as a purchase and accordingly, the assets
acquired and liabilities assumed have been recorded at their estimated
fair values which approximates book value. The following table
summarizes this acquisition:
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<PAGE>
Purchase Price, including acquisition costs $ 2,620,915
Liabilities assumed 454,159
Assets acquired (1,146,561)
-----------
Goodwill $ 1,928,513
=========
Accumulated amortization on goodwill at March 31, 1997 was
$32,141.
The following schedule combines the unaudited pro forma
results of operations of the Company and EBS for the six months ended
June 30, 1996 as if the acquisition had occurred on January 1, 1996 and
includes such adjustments which are directly attributable to the
acquisition. It should not be considered indicative of the results that
would have been achieved had the acquisition not occurred or the
results that would have been obtained had the acquisition actually
occurred on January 1, 1996.
Net sales $ 1,161,093
Net income 156,475
Net income per share .04
Shares used in computation 3,668,831
5. MINORITY INTEREST
Pursuant to terms of employment agreements, 10% of the stock
in EBS has been issued with the unearned portion recorded as deferred
compensation.
6. TREASURY STOCK
In July 1997, the Company purchased 500,000 shares of common
stock from the original sellers of EBS for $233,000. The Company plans
to retire these shares, therefore, such amount has been reclassed to
accumulated deficit.
7. RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board
"FASB" issued SFAS No. 128 "Earnings Per Share", which is effective in
fiscal 1998, early application is not permitted. SFAS No. 128
simplifies the standards for computing earnings per share "EPS". It
replaces the presentation of primary EPS with the presentation of basic
EPS. Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of
shares outstanding for the period. If SFAS 128 had been applied to the
results reported on Form 10-Q's since fiscal 1996, the Company's basic
EPS
-5-
<PAGE>
would not change.
In February 1997, the FASB issued SFAS No. 129 "Disclosure of
Information about Capital Structure", which is effective in fiscal
1998. SFAS No. 129 requires the following disclosures; liquidation
preferences of preferred stock, information about rights and privileges
of outstanding equity securities and redemption criteria for all issues
of capital stock. Due to the Securities and Exchange Commissions's
disclosure requirements of publicly held entities, there will be no
additional disclosure required for the Company.
In June 1997, the FASB issued SFAS No. 130 "Reporting
Comprehensive Income", which is effective in fiscal 1998. SFAS No. 130
requires the disclosure of the components of the change in equity of a
business enterprise during a period from transactions and other events
except for distributions and investments to be reported in the
statement of operations, cash flows and in certain circumstances as a
component of equity as a separate category "accumulated other
comprehensive income". Examples of items included in comprehensive
income are foreign currency translation adjustments, unrealized
securities gains and losses and pension liability adjustments. In
addition publicly held entities will be required to provide such
disclosure on an interim basis. Currently there is no increased
disclosure for items defined under comprehensive income for the
Company.
In June 1997, the FASB issued SFAS No. 131 "Disclosures about
Segments of an Enterprise and Related Information", which is effective
in fiscal 1998 for publicly held entities only. SFAS No. 131 requires
the disclosure of various data pertaining to entities operating with
different business segments. The Company does operate in two different
business segments and the statement of operations currently discloses
the required data relating to the Company under SFAS No. 131. The
implementation of SFAS No. 131 may not require additional material
disclosure.
-6-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Prior to December 2, 1996, the Company's primary focus was to search for and
identify acquisition candidates for the purpose of merging with or acquiring
promising young companies in need of an infusion of cash and/or superior
management. On December 2, 1996, the Company completed the acquisition of 95% of
the stock of Engineered Business Systems, Inc. ("EBS"), in a leveraged
transaction. Total value of the transaction was approximately $3 Million.
Results of Operations
Total revenues for the six months and three months ended June 30, 1997 were
$2,588,958 and $1,477,737 respectively, which is an increase over the Company's
revenues of $0 for the six months and three months ended June 30, 1996. The
increase resulted entirely from the acquisition of EBS on December 2, 1996 and
the results of EBS's operations for the six month period.
Cost of sales was $625,142 and $381,087 for the six months and three months
ended June 30, 1997, which again was an increase over the Company's six months
and three months ended June 30, 1996 cost of sales of $0. Gross profit as a
percentage of revenue was 76% for the six months ended June 30, 1997 and 74% for
the three months ended June 30, 1997. The increase resulted entirely from the
acquisition of EBS on December 2, 1996, and the results of EBS's operations for
the six month period.
Selling, general and administrative expenses for the six months and three months
ended June 30, 1997 were $1,468,835 and $774,244 as compared to $9,796 and
$4,349 for the six and three months ended June 30, 1996. Management believes
that the increase in selling, general and administrative expenses was due to the
acquisition of EBS and the expenses related to its operations, compared to the
minimal operating expenses associated with a non-revenue producing company.
Non-cash imputed compensation for the six months and three months ended June 30,
1997 was $41,420 and $28,045, as compared to $13,250 and $0 for the six months
and three months ended June 30, 1996.
For the six months ended June 30, 1997, the Company's net income included a
non-cash expense of $98,723. Such expense was incurred as a result of
depreciation and amortization of assets acquired with the acquisition of EBS as
well as the goodwill created in the acquisition.
Interest expense was $52,784 for the six months ended June 30, 1997 and $33,298
for the three months ended June 30, 1997, compared to $0 for the six months and
three months ended June 30, 1996, reflecting interest paid on an 8% promissory
note of $1,600,000. The promissory note is held by the selling shareholders of
EBS, created during the sale of EBS to the Company. Minority interest for the
six months ended June 30, 1997 was $72,903, reflecting interest due to holders
of 15% of EBS Stock.
-7-
<PAGE>
As a result of all the above factors, net income for the six months and three
months ended June 30, 1997 was $279,662 and $190,195, as compared to a net loss
of $23,046 for the six months ended June 30, 1996 and a net loss of $4,349 for
the three months ended June 30, 1996.
Liquidity and Capital Resources
The Company has funded its working capital and capital expenditure requirements
from cash provided from operations and from the proceeds of the sales of
Preferred Stock and Common Stock. The primary source of cash receipts is from
payments of accounts receivable and sales.
In July 1997, the Company purchased 500,000 shares of common stock from the
original sellers of EBS for $233,000.
As of June 30, 1997, the Company had cash of $592,000.
To date, inflation has not had a material effect on the Company's business. The
Company believes that the effects of future inflation may be minimized by
controlling costs and increasing efficiency.
-8-
<PAGE>
PART II - Other Information
Item 6. Exhibit and Reports on form 8-K
A. Exhibits
None.
B. Report on Form 8-K
None.
-9-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TRIANGLE IMAGING GROUP, INC.
Dated: 08/12/97 By: /s/ Vito Bellezza
Vito Bellezza
President, Chairman of the Board,
Chief Financial Officer, Chief Executive
Officer and Director
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000764763
<NAME> TRIANGLE IMAGING GROUP, INC.
<MULTIPLIER> 1
<CURRENCY> DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 592,540
<SECURITIES> 0
<RECEIVABLES> 616,927
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,217,926
<PP&E> 207,924
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,324,268
<CURRENT-LIABILITIES> 1,219,102
<BONDS> 1,250,000
0
10,000
<COMMON> 8,950
<OTHER-SE> 585,923
<TOTAL-LIABILITY-AND-EQUITY> 3,324,268
<SALES> 2,588,958
<TOTAL-REVENUES> 3,324,268
<CGS> 625,142
<TOTAL-COSTS> 625,142
<OTHER-EXPENSES> 1,631,370
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<INCOME-PRETAX> 279,662
<INCOME-TAX> 0
<INCOME-CONTINUING> 279,662
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<EXTRAORDINARY> 0
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<NET-INCOME> 279,662
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
