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 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: 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 September 30, 1997 was 9,343,165 shares.
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TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARY
INDEX
Page
Number
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PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheet - September 30,1997........................................... 1
Consolidated Statement of Operations - For the Nine Months
and Three Months Ended September 30, 1997 and 1996....................................... 2
Consolidated Statement of Cash Flows - For the Nine Months Ended
September 30, 1997 and 1996.............................................................. 3
Notes to Financial Statements............................................................ 4-7
Item 2. Management's Discussion and Analysis..................................................... 8-9
PART II - OTHER INFORMATION................................................................................ 10
SIGNATURES................................................................................................. 11
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PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
September 30,
1997
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CURRENT ASSETS:
Cash and cash equivalents $ 758,896
Accounts receivable, net of allowance for doubtful
accounts of $128,000 526,673
Prepaid expenses 12,585
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TOTAL CURRENT ASSETS 1,298,154
EQUIPMENT 210,172
GOODWILL 1,689,385
OTHER ASSETS 190,414
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$ 3,388,125
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 515,369
Deferred revenue 349,967
Due to stockholders 50,000
Current portion of note payable 300,000
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TOTAL CURRENT LIABILITIES 1,215,336
NOTE PAYABLE 1,175,000
MINORITY INTEREST 82,081
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par, 1,000,000 shares authorized:
Class A, 10,000 shares issued and outstanding 10,000
Common stock, $.001 par value,
authorized 50,000,000 shares: 9,343,165
issued and outstanding 9,345
Additional paid-in capital 3,061,317
Accumulated deficit (1,330,664)
Stock subscription receivable (619,950)
Deferred compensation (214,340)
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TOTAL STOCKHOLDERS' EQUITY 915,708
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$ 3,388,125
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See notes to financial statements.
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TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
----------------------------------- ------------------------------------
1997 1996 1997 1996
---------------- ---------------- ---------------- ----------------
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SALES $ 1,487,382 $ - $ 4,076,340 $ -
COST OF SALES 409,302 - 1,034,444 -
---------------- ---------------- ---------------- ----------------
GROSS PROFIT 1,078,080 - 3,041,896 -
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 749,567 49,210 2,218,402 59,006
NON-CASH IMPUTED COMPENSATION EXPENSE 23,420 - 64,840 13,250
AMORTIZATION OF GOODWILL 18,604 - 66,816 -
---------------- ---------------- ---------------- ----------------
INCOME (LOSS) FROM OPERATIONS 286,489 (49,210) 691,838 (72,256)
INTEREST EXPENSE 30,760 - 83,544 -
---------------- ---------------- ---------------- ----------------
INCOME (LOSS) BEFORE MINORITY INTEREST 255,729 (49,210) 608,294 (72,256)
MINORITY INTEREST (13,935) - 58,968 -
---------------- ---------------- ---------------- ----------------
NET INCOME (LOSS) $ 269,664 $ (49,210) $ 549,326 $ (72,256)
================ ================ ================ ================
NET INCOME PER SHARE $ 0.02 $ (0.01) $ 0.05 $ (0.02)
================ ================ ================ ================
WEIGHTED AVERAGE SHARES OUTSTANDING 12,660,665 3,907,165 11,096,832 3,748,276
================ ================ ================ ================
See notes to financial statements.
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TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARY
STATEMENT OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
-----------------------------------
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 549,326 $ (23,046)
Adjustment to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 75,766 -
Amortization of goodwill 66,816 -
Non-cash imputed compensation 64,840 13,250
Minority interest 58,968 -
Changes in assets and liabilities:
Increase in accounts receivable (156,805) -
Decrease in prepaid expenses 18,690 -
Increase in other assets (186,317) -
Increase in accounts payable and accrued expenses 244,194 8,779
Increase in deferred revenue 2,764 -
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CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 738,242 (1,017)
---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (94,222) -
---------------- ---------------
CASH USED IN INVESTING ACTIVITIES (94,222) -
---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of note payable (125,000) -
Proceeds from sale of common stock 260,750 -
Payment of dividends (5,891) -
Other 17,753 -
Purchase of treasury stock (233,000) -
---------------- ---------------
CASH PROVIDED BY FINANCING ACTIVITIES (85,388) -
---------------- ---------------
NET INCREASE (DECREASE) IN CASH 558,632 (1,017)
CASH - BEGINNING OF PERIOD 200,264 1,371
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CASH - END OF PERIOD $ 758,896 $ 354
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See notes to financial statements.
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TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
of Triangle Imaging Group, Inc. (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10- QSB 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 considered necessary for a fair
presentation (consisting of normal recurring accruals) have been
included. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates. Operating results for the nine month
period ended September 30, 1997 are not necessarily indicative of the
results that may be expected for the year ending December 31,1 997. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1996.
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 75,000 shares of common stock were issued for
services during the quarter ended September 30, 1997. The services are
to be performed over the next year. Such shares have been valued at
their fair market value on the date of issuance which will result in a
total non-cash charge to income of $52,500. The non-cash charge to
income for the three months ended September 30, 1997 was $13,125.
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.
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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:
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 September 30, 1997 was
$74,851.
The following schedule combines the unaudited pro forma
results of operations of the Company and EBS for the nine months ended
September 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 $ 2,491,640
Net income 249,237
Net income per share .06
Shares used in computation 3,748,276
5. MINORITY INTEREST
Effective July 1, 1997, the terms of the employment agreement
with the Company's President were amended. The President's ownership of
10% of EBS was replaced with options to purchase 10% of the shares of
EBS. Accordingly, the minority interest associated with the 10%
ownership was reclassified against goodwill.
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 reclassified to
accumulated deficit.
7. STOCK SUBSCRIPTION RECEIVABLE
In April 1997, pursuant to stock subscription agreements, the
President of the Company and the wife of the Chairman subscribed to
2,333,000 shares of common stock for a total value of $768,700. As of
September 30, 1997 $148,750 has been received leaving a balance due of
$619,950.
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8. OTHER ASSETS
The Company has capitalized software costs included in Other
Assets which totaled $156,457 at September 30, 1997. The capitalization
of such costs is in accordance with SFAS No. 86.
9. 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 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.
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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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 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 nine months and three months ended September 30, 1997
were $4,076,340 and $1,487,382 respectively, which is an increase over the
Company's revenues of $0 for the nine months and three months ended September
30, 1996. The increase resulted entirely from the acquisition of EBS on December
2, 1996 and the results of EBS's operations for the nine month period.
Cost of sales were $1,034,142 and $409,302 for the nine months and three months
ended September 30, 1997, which again was an increase over the Company's nine
months and three months ended September 30, 1996 cost of sales of $0. Gross
profit as a percentage of revenue was 75% for the nine months ended September
30, 1997 and 72% for the three months ended September 30, 1997. The increase
resulted entirely from the acquisition of EBS on December 2, 1996, and the
results of EBS's operations for the nine month period.
Selling, general and administrative expenses for the nine months and three
months ended September 30, 1997 were $2,218,402 and $749,567 as compared to
$59,006 and $49,210 for the nine and three months ended September 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 nine months
and three months ended September 30, 1997 was $64,840 and $23,420, as compared
to $13,250 and $0 for the nine months and three months ended September 30, 1996.
For the nine months ended June 30, 1997, the Company's net income included a
non-cash expense of $66,816. 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 $83,544 for the nine months ended September 30, 1997 and
$30,760 for the three months ended September 30, 1997, compared to $0 for the
nine months and three months ended September 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 nine months ended September 30, 1997 was $58,968,
reflecting
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$41,541 interest due to holders of 5% of EBS Stock and $17,427 interest due to
holders of 10% of EBS Stock for the first quarter of 1997..
As a result of all the above factors, net income for the nine months and three
months ended September 30, 1997 was $549,326 and $269,664, as compared to a net
loss of $72,256 for the nine months ended September 30, 1996 and a net loss of
$49,210 for the three months ended September 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 September 30, 1997, the Company had cash of $759,000.
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.
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PART II - Other Information
Item 5. Other Information
During the quarter ended September 30, 1997, the Board of
Directors appointed Harold S. Fischer as President and Vito A. Bellezza
as Chief Executive Officer of the Company.
Item 6. Exhibit and Reports on form 8-K
A. Exhibits
None.
B. Report on Form 8-K
None.
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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: 11/12/97 By: /s/ Vito Bellezza
Vito Bellezza
Chairman of the Board,
Chief Financial Officer, Chief Executive
Officer and Director
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