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, 1998
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 1998 was 12,850,265 shares.
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TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARY
INDEX
Page
Number
PART I -- FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheet --
June 30, 1998...........................................3
Consolidated Statement of Operations --
For the Six and Three Months
Ended June 30, 1998 and 1997............................4
Consolidated Statement of Cash Flows --
For the Six and Three Months
Ended June 30, 1998 and 1997............................5
Notes to Financial Statements..............................6-7
Item 2. Management's Discussion and Analysis......................8-10
PART II -- OTHER INFORMATION..................................................11
SIGNATURES....................................................................12
<PAGE>
PART 1 -- FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
------
June 30,
1998
---------------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 827,409
Accounts receivable, net of allowance for doubtful
accounts of $63,000 1,754,036
Prepaid expenses 62,489
Deferred tax asset 122,000
---------------
TOTAL CURRENT ASSETS 2,765,934
EQUIPMENT 278,754
GOODWILL 3,429,294
OTHER ASSETS 1,251,659
---------------
$ 7,725,641
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,045,889
Bank line of credit 39,533
Deferred revenue 324,248
Due to stockholders 50,000
Current portion of note payable 400,000
---------------
TOTAL CURRENT LIABILITIES 1,859,670
NOTE PAYABLE 925,000
DEFERRED TAX LIABILITY 3,000
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value,
authorized 50,000,000 shares: 12,850,265
issued and outstanding 12,851
Additional paid-in capital 5,115,398
Accumulated deficit (79,428)
Stock subscription receivable (25,050)
Deferred compensation (85,800)
---------------
TOTAL STOCKHOLDERS' EQUITY 4,937,971
---------------
$ 7,725,641
===============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three months ended Six months ended
June 30, June 30,
----------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
SALES $ 3,134,352 $ 1,477,737 $ 4,821,717 $ 2,588,958
COST OF SALES 944,013 381,087 1,219,794 625,142
------------ ------------ ------------ -----------
GROSS PROFIT 2,190,339 1,096,650 3,601,923 1,963,816
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 1,662,638 774,244 2,605,408 1,468,835
NON-CASH IMPUTED COMPENSATION EXPENSE 49,640 28,045 99,280 41,420
AMORTIZATION OF GOODWILL 44,505 24,106 66,170 48,212
------------ ------------ ------------ -----------
INCOME (LOSS) FROM OPERATIONS 433,556 270,255 831,065 405,349
INTEREST EXPENSE 43,156 33,298 62,908 52,784
NON-RECURRING CHARGES ASSOCIATED
WITH ACQUISITIONS 151,200 -- 151,200 --
------------ ------------ ------------ -----------
INCOME (LOSS) BEFORE MINORITY INTEREST AND
INCOME TAX PROVISION 239,200 236,957 616,957 352,565
MINORITY INTEREST -- 46,762 -- 72,903
NET INCOME BEFORE INCOME TAX PROVISION 239,200 190,195 616,957 279,662
INCOME TAX PROVISION -- -- 107,000 --
------------ ------------ ------------ -----------
NET INCOME $ 239,200 $ 190,195 $ 509,957 $ 279,662
============ ============ ============ ===========
NET INCOME PER SHARE:
Basic $ 0.02 $ 0.02 $ 0.05 $ 0.04
============ ============ ============ ===========
Diluted $ 0.02 $ 0.02 $ 0.04 $ 0.03
============ ============ ============ ===========
NUMBER OF SHARES USED IN COMPUTATION:
Basic 12,080,552 8,648,665 10,284,356 7,090,998
============ ============ ============ ===========
Diluted 14,777,370 10,351,606 13,504,778 8,793,939
============ ============ ============ ===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six months ended
June 30,
----------------------------
1998 1997
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 509,957 $ 279,662
Adjustment to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation 43,418 50,511
Amortization of goodwill 66,170 48,212
Non-cash imputed compensation 99,280 23,670
Minority interest -- 72,903
Changes in assets and liabilities:
Increase in accounts receivable (975,481) (247,059)
Increase in prepaid expenses (24,000) 22,726
Decrease in deferred tax asset 107,000
Increase in other assets (635,016) (32,055)
Increase in accounts payable
and accrued expenses 641,635 267,379
Increase in bank line of credit 39,533
Decrease in deferred revenue (66,677) (16,655)
------------ -----------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (194,181) 469,294
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition (462,195) --
Purchase of equipment (167,683) (44,858)
------------ -----------
CASH USED IN INVESTING ACTIVITIES (629,878) (44,858)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of note payable (275,000) (50,000)
Proceeds from sale of common stock 910,858 250,750
Decrease in stock subscription receivable 501,250
Purchase of treasury stock (10,649) (233,000)
------------ -----------
CASH PROVIDED BY FINANCING ACTIVITIES 1,126,459 (32,250)
------------ -----------
NET INCREASE (DECREASE) IN CASH 302,400 392,186
CASH -- BEGINNING OF PERIOD 525,009 200,264
------------ -----------
CASH -- END OF PERIOD $ 827,409 $ 592,450
============ ===========
</TABLE>
See notes to financial statements.
<PAGE>
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 six month period
ended June 30, 1998 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1998. 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, 1997.
2. EARNINGS PER SHARE
Basic earnings per share are computed on the weighted average number of
common shares actually outstanding during the period. Diluted earnings
per share considers potential shares issuable upon exercise or
conversion of other outstanding instruments where dilution would
result. The earnings per share for the prior period have been restated
to conform with the Company's adoption of FAS No. 128.
3. STOCKHOLDERS' EQUITY
During the three months ended June 30, 1998, several individuals
exercised stock options resulting in the issuance of 350,000 shares of
common stock and the Company receiving proceeds totaling $133,750.
During the three months ended June 30, 1998 the Company sold 173,110
shares of common stock resulting in proceeds of $380,698.
During the three months ended June 30, 1998, the Company made several
acquisitions. In connection with these acquisitions, 885,000 shares of
common stock were issued. The shares were valued at their fair market
value at the time of negotiations.
4. ACQUISITIONS
During the three months ended June 30, 1998, the Company acquired the
stock of Credit Bureau Services, Inc., EJG Services, Florida Credit
Bureau, Multitask Computer Systems, Inc. and Trimax Systems
Corporation. These companies were acquired by the Company for $250,000
cash, $100,000 notes payable, and 885,000 shares of the Company's
common stock. The acquisition of these companies have 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 purchase prices, including acquisition
costs, less the companies' book values totaled $1,857,260 which was
charged to goodwill.
The following schedule combines the unaudited pro forma results of operations of
the Company and these acquisitions for the six months ended June 30, 1998 and
1997 as if the acquisition had occurred on January 1, 1998 and 1997 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, 1997.
<TABLE>
Six Months Ended June 30,
1998 1997
--------------- ---------------
<S> <C> <C>
Net sales $ 5,812,604 $ 4,751,216
Net income $ 441,610 $ 310,804
Net income per share:
Basic $ .04 $ .04
Diluted $ .03 $ .03
Shares used in computation:
Basic 11,169,356 7,975,998
Diluted 14,389,778 9,678,939
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition
Forward Looking
Statements in this Management's Discussion and Analysis of Financial Condition
and Results of Operations, and elsewhere in this document, as well as statements
made in press releases and oral statements that may be made by the Company or by
officers, directors or employees of the Company acting on the Company's behalf
that are not statements of historical or current fact, constitute "forward
looking" statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other unknown factors that could cause the actual
results of the Company to be materially different from the historical results or
from any future results expressed or implied by such forward-looking statements.
In addition to statements which explicitly describe such risks and
uncertainties, readers are urged to consider statements labeled with the terms
"believes", "belief", "expects", "intends", "anticipates" or "plans" to be
uncertain forward-looking statements. The forward looking statements contained
herein are also subject generally to other risks and uncertainties that are
described from time to time in the Company's reports and registration statements
filed with the Securities and Exchange Commission.
Three months ended June 30, 1998 compared to the three months ended June 30,
1997
Triangle Imaging Group, Inc. (the "Company") reported total revenues for the
second quarter of 1998 of $3,134,352, which is an increase of 112% over the
Company's second quarter 1997 revenues of $1,477,737. The increase in revenues
resulted from sales from new acquisitions, increased software revenues,
increased reoccurring revenues, and the increased sale of outsourcing and
consulting services, which can be attributed to an increase in the Company's
larger sales force. The increase in software revenues was affected by the
release for sale of its ACES 98 software program in June 1998.
Engineered Business Systems, Inc. (EBS) contributed sales for the second quarter
of 1998 in the amount of $1,635,518. Reoccurring revenues in the CRISTM and
ACESTM product lines constituted 49% of EBS's revenues in the second quarter
1998. Revenues from the ACESTM product line contributed 14% of the reoccurring
revenues for the second quarter 1998 while the remaining 35% of revenues
contributed to reoccurring revenues were derived from the CRISTM product line.
Reoccurring revenues consist of annual software maintenance contracts, technical
support revenues, revenues generated on a per report basis and monthly software
rental programs. New sales of CRISTM products constituted 7% of EBS's revenues
for second quarter 1998 and new sales of ACESTM products comprised 14% of the
revenues. Outsourcing revenues accounted for approximately 27% of EBS's revenues
in second quarter 1998.
Other income comprised the remaining 3% of revenues for the second quarter 1998.
QuickCREDIT Corp. (QCC), a wholly owned subsidiary of the Company that acquired
Credit Bureau Services, Inc., as of April 30, 1998, Florida Credit Bureau, Inc.,
and EJG Services, Inc., as of May 22, 1998, contributed sales for the second
quarter of 1998 in the amount of $511,393. Of the QCC sales 100% of the revenues
were derived from the sale of individual and residential mortgage credit report
products, primarily consisting of merged in-file credit reports and RMCRs. QCC
was formed in February of 1998.
TriMax Systems Inc., acquired on May 29, 1998 along with Multi Task Inc.,
contributed sales for the second quarter of 1998 in the amount of $986,442. The
two companies now operate as TriMax Systems, Inc. Of the TriMax Systems Inc.
sales, $637,281 was due to the sale of computer hardware and $349,161 was due to
sale of consulting services and installation charges.
The cost of revenues was $944,013 in the second quarter 1998, which was an
increase from the Company's second quarter 1997 costs of $381,087. Gross profit,
$2,190,339, as a percentage of revenues was 70% in second quarter 1998 as
compared to the 74%, or $1,096,650, for the second quarter 1997. The increase in
costs and decrease in gross profit as a percentage resulted primarily from the
acquisition of TriMax Systems Inc. and MultiTask Inc. and the increased cost of
goods sold and decreased profits margins for its hardware derived sales as well
as Triangle management's operational efficiencies not having the time to become
effective after its acquisitions.
Selling, general and administrative expenses were $1,662,638 in the second
quarter 1998 compared to $774,244 in the 1997 comparable period, an 114%
increase of $888,394 and a cost of revenues increase of 1%. The monetary
increase in selling, general, and administrative expenses was due to the
increased expenses associated with higher sales, continued and increased
investment in its product lines while the increase as a percentage of revenues
was due to Triangle management's operational efficiencies not having the time to
become effective in its acquisitions. Sales and earnings increases, due to the
hiring, training and development of new sales representatives and consultants
during the second quarter, are not expected to reach maximum potential until
sometime in the third quarter of 1998. Expenses also include additional data
processing equipment, salaries, training, travel and starting bonuses for newly
hired consultants and sales personnel not expected to continue in the future.
Non-cash imputed compensation expense for the second quarter 1998 was
$49,640, compared to $28,045 for second quarter 1997.
The Company's net income, in second quarter 1998, reflects non-recurring charges
associated with acquisitions totaling $151,200. This was a direct result of the
duplicative costs of redundant facilities including rent, telephones, personnel,
the conversion of data centers and other non-recurring expenses associated with
the acquisition and transition of Credit Bureau Services, Inc., Florida Credit
Bureau, Inc, EJG Services, Inc., TriMax Systems Inc. and MultiTask Inc.
Interest expense was $43,156 in the second quarter 1998, compared to $33,298 in
the second quarter 1997, reflecting interest paid on a promissory note. Minority
interest for the second quarter 1998 was eliminated by the Company acquiring the
remaining 5% of the outstanding shares from the minority shareholders of EBS.
The Company's net income was $239,200 for the second quarter 1998 as compared to
the net income of $190,195 for the second quarter 1997. The increase in the net
income in the second quarter 1998 is primarily attributable to a combination of
all the factors discussed above.
Liquidity and Capital Resources
The Company has funded the vast majority of its working capital and capital
expenditure requirements with cash provided from operations and from money
raised from the sale of restricted Common Stock to employees of the Company. The
management of the Company believes cash flows from continuing operations will be
sufficient to fund expenditures into the foreseeable future.
At June 30, 1998, the Company had a cash position of $827,409, an increase of
39% from the cash position of $592,450 as of June 30, 1997. The June 30, 1998
cash position was derived from accumulation of $302,400 from operating cash
flows as well as an accumulation of $910,858 raised through the sale of private
placement shares of common stock to employees of the Company. Cash resources
were used for the cash portion of the acquisition of Credit Bureau Services,
Inc., Florida Credit Bureau, Inc, and EJG Services, Inc., as well as for working
capital infusion to the subsidiary companies.
Management believes that the expenses incurred during the quarter for the hiring
and training of new consultants and sales personnel will begin to pay dividends
in the form of increased sales and net earnings beginning in the third quarter
of this year. The talent, ability and experience of new personnel recently hired
can be compared favorably to any successful organization. This, combined with
the full quarter of our new ACES 98 software product, and the release of DESC,
our newest software package scheduled for this quarter, will insure that sales
will increase more rapidly.
Management further believes that the experience obtained from the five completed
acquisitions during the second quarter will prove to be invaluable. The
transition team assembled by Triangle to consolidate operations of the acquired
companies has gained the experience to make future acquisition transitions much
smoother.
Year 2000
The Company recognizes that a challenging problem exists in that many computer
systems worldwide do not have the capability of recognizing the year 2000 or the
years thereafter. No easy technological "quick fix" has yet been developed for
this problem. The Company has spent a considerable sum of money to assure that
all its software programs are year 2000 compliant and believes that they all
are. This "Year 2000 Computer Problem" creates risk for the company from
unforeseen problems in its own software and from third parties with whom the
company deals. Such failures of the Company and/or third parties' computer
systems could have a material adverse effect on the Company and its ability to
conduct its business in the future.
Inflation
The Company does not believe that inflation has had a material adverse effect on
sales or income during the past several years. Increases in the cost of supplies
and services, or other operating costs, could adversely affect the Company's
operations; however, the Company believes it could increase prices to offset
increases in costs of goods sold or other operating costs.
<PAGE>
PART II -- Other Information
Item 6. Exhibit and Reports on Form 8-K
A. Exhibits
None.
B. Report on Form 8-K
Form 8-K dated April 30, 1998.
<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: August 11, 1998 By: /s/ Vito A.Bellezza
------------------ --------------------------------------
Vito Bellezza
President, Chairman of the Board,
Chief Financial Officer, Chief Executive
Officer and Director
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000764763
<NAME> Triangle Imaging Group, Inc.
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 827,409
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</TABLE>
