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 March 31, 1999
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.
1800 NW 49th Street, Suite 100, Ft. Lauderdale, FL 33309
---------------------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
954-229-5100
---------------------------------------------------
(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 May 7, 1999 was 14,143,791 shares.
<PAGE>
TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARIES
FORM 10-QSB
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheet -
March 31, 1999................................ 3
Consolidated Statement of Operations -
For the Three Months Ended March 31, 1999 and 1998 ........ 5
Notes to Financial Statements.............................. 7
Item 2. Management's Discussion and Analysis ................ 9
PART II - OTHER INFORMATION ........................................... 14
SIGNATURES ............................................................ 16
2
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
March 31, 1999
--------------
CURRENT ASSETS
Cash and cash equivalents $ 59,328
Accounts receivable, net of allowance for
doubtful accounts of: $(96,187.50) 1,220,332
Prepaid expenses 46,177
----------
TOTAL CURRENT ASSETS $1,325,837
EQUIPMENT 338,622
GOODWILL 1,971,253
OTHER ASSETS $ 489,383
----------
$4,125,095
==========
3
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, 1999
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 897,230
Deffered revenue 303,255
Due to stockholders 50,000
Current portion of note payable 625,000
-----------
TOTAL CURRENT LIABILITIES $ 1,875,485
NOTE PAYABLE $ 1,500,000
NOTES PAYABLE SUBJECT TO PUTS $ 1,485,000
STOCKHOLDERS EQUITY
Common stock, $.001 par value, $ 13,523
Authorized 50,000,000 shares 13,523,790 shares
issued and outstanding
Additional paid-in capital
6,410,719
Accumulated deficit (5,636,682)
Deffered compensation (37,950)
Common stock subject to put (1,485,000)
-----------
TOTAL STOCKHOLDERS' EQUITY $ (735,390)
$ 4,125,095
===========
See notes to financial statements.
4
<PAGE>
TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three months ended Three months ended
March 31, 1999 March 31, 1998
------------------ -----------------
SALES $ 2,091,079 $ 1,687,365
COST OF SALES 679,787 275,781
--------------- ---------------
GROSS PROFIT 1,411,292 1,411,584
SELLING, GENERAL & ADMIN 1,155,316 942,770
PRODUCT DEVELOPMENT 62,637 --
NON-CASH IMPUTED COMPENSATION 10,295 49,640
AMORTIZATION OF GOODWILL 27,415 21,665
--------------- ---------------
INCOME (LOSS) FROM OPERATIONS 155,629 397,509
INTEREST EXPENSE 70,562 19,752
--------------- ---------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST & TAX 85,067 377,757
TAX PROVISION -- 107,000
--------------- ---------------
NET INCOME (LOSS) FROM CONTINUING 85,067 270,757
OPERATIONS
NET INCOME (LOSS) $ 85,067 $ 270,757
=============== ===============
NET INCOME PER SHARE:
BASIC $ 0.01 $ 0.03
=============== ===============
DILUTED $ 0.01 $ 0.02
=============== ===============
NUMBER OF SHARES USED IN COMPUTATION:
BASIC 13,312,654 9,668,160
=============== ===============
DILUTED 14,772,654 12,096,077
=============== ===============
See notes to financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
TRIANGLE IMAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 85,067 $ 270,757
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation 24,848 31,419
Amortization of goodwill 27,415 21,665
Non-cash imputed compensation 10,295 49,640
Changes in assets and liabilities
Increase in accounts receivable (413,091) (295,023)
Decrease in deferred tax asset -- 107,000
(Increase)/decrease in other assets 28,937 (285,321)
(Increase)/decrease in accounts payable and accrued expenses (224,479) 114,765
Decrease in deferred revenue (165) (77,512)
--------- ---------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (461,173) (62,610)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (75,735) (46,253)
--------- ---------
CASH USED IN INVESTING ACTIVITIES (75,735) (46,253)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of stock 466,813 396,411
--------- ---------
Payment of debt (100,000) (100,000)
--------- ---------
CASH PROVIDED FROM INVESTING ACTIVITIES 366,813 296,411
--------- ---------
NET INCREASE IN CASH (170,095) 187,548
CASH - BEGINNING OF PERIOD 229,423 525,009
--------- ---------
CASH - END OF PERIOD $ 59,328 $ 712,557
========= =========
</TABLE>
See notes to financial statements.
6
<PAGE>
TRIANGLE IMAGING GROUP, INC.
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 representation (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 three month period ended March 31, 1999 are not necessarily
indicative of the results that may be expected for the year ending December
31, 1999. 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, 1998.
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.
3. STOCKHOLDERS' EQUITY
During the period ended March 31, 1999, the Company issued 416,813
shares of common stock for a total value of $416,813 and issued an
additional 45,000 shares of common stock in lieu of a cash payment to a
former principal of one of the acquired credit bureaus.
4. ACQUISTIONS
In May 1998, the Company acquired all of the outstanding capital
stock of Credit Bureau Services, Inc., EJG Services, Inc. and Florida
Credit Bureau, Inc. These companies were acquired by the Company for an
aggregate of (i) $250,000 in immediately available funds, (ii) promissory
notes in the principal amount of $100,000 and (iii) 495,000 restricted
shares of the Company's common stock. The acquisitions 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 market
values which approximates book value. The purchase prices, including
acquisition costs, less the companies' book values was recorded as good
will.
7
<PAGE>
The following schedule combines the unaudited pro-forma results of
operations of the Company and these acquisitions for the quarter ended
March 31, 1998 as if the acquisitions had occurred on January 1, 1998 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 acquisitions not occurred or the results
that would have been obtained had the acquisitions actually occurred on
January 1, 1998.
Quarter Ended
March 31, 1998
--------------
Net sales $ 2,176,527
Net income $ 298,307
Net income per share:
Basic $ .03
Diluted $ .02
Shares used in computation:
Basic 10,163,160
Diluted 12,591,077
8
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE COMPANY'S FINANCIAL CONDITION AND RESULTS OF
OPERATION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES
THERETO APPEARING ELSEWHERE IN THIS DOCUMENT.
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 RISK AND UNCERTAINTIES THAT ARE
DESCRIBED FROM TIME TO TIME IN THE COMPANY'S REPORTS AND REGISTRATION STATEMENTS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
The following table sets forth information on operations for the periods
indicated:
Percentage of Net Revenues
Three months ended
March 31,
CONSOLIDATED
1999 1998
----------------- ------------------
$ % $ %
---------- ---- ---------- ----
Net Sales $2,091,079 100% $1,687,365 100%
Cost of Sales $ 679,787 33% $ 275,781 16%
Operating Expenses $1,255,663 60% $1,014,075 60%
Income from Operations $ 155,629 7% $ 397,509 24%
Interest Expense (net) $ 70,562 3% $ 19,752 1%
Income Before Income Taxes $ 85,067 4% $ 377,757 22%
Net Income $ 85,067 4% $ 270,757 16%
9
<PAGE>
By Segment:
ENGINEERED BUSINESS SYSTEMS
Percentage of Net Revenues
Three months ended
March 31,
1999 1998
----------------- ------------------
$ % $ %
---------- ---- ---------- ----
Net Sales $1,677,999 100% $1,687,365 100%
Cost of Sales $ 334,754 20% $ 275,781 16%
QUICKCREDIT CORP.
Percentage of Net Revenues
Three months ended
March 31,
1999 1998
----------------- ------------------
$ % $ %
---------- ---- ---------- ----
Net Sales $ 413,080 100% $ -- 0%
Cost of Sales $ 345,033 84% $ -- 0%
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,1999 VS. THREE MONTHS ENDED MARCH 31,1998
CONSOLIDATED
Sales for the quarter ended March 31, 1999 were $2,091,079 or an increase of 24%
over the $1,687,365 in sales for the period ended March 31, 1998. The increase
in sales is due to several factors including additional revenue resulting from
the acquisition of three credit bureaus by QuickCREDIT Corp., a subsidiary of
the Company ("QCC"), during the second quarter of 1998 (the "QCC Acquisitions"),
sales of the recently released DESC software product, new revenue from the
emerging consulting practice, and increased sales within the outsourcing
services group. Management believes that the demand for the Company's products
remains strong in a continued period of low interest rates, increased consumer
debt accumulation and steady housing and refinancing markets.
Cost of sales as a percentage of sales increased 17% from 16% for the quarter
ended March 31, 1998 to 33% for the quarter ended March 31, 1999. This is
primarily a result of the additional cost associated with the revenue generated
from the QCC Acquisitions. Gross profit as a percentage of revenue has decreased
from 84% for the first quarter of 1998 to 78% for the first quarter of 1999 for
the same reason.
10
<PAGE>
Selling, general and administrative (SG&A) expenses were $1,155,316 for the
quarter ended March 31, 1999 representing an increase of 23% over SG&A expenses
of $942,770 for the quarter ended March 31, 1998. This increase in SG&A is due
to the additional SG&A associated with the operation of the QCC Acquisitions
which accounted for approximately 10% of the increase. Additionally, the Company
focused on upgrading its sales organization to expand the Company's market share
in its existing client base and to create new opportunities in new markets
resulting in a further increase in sales and marketing expenses. Research and
Development expense was $62,637 in the quarter ended March 31, 1999 compared to
no Research and Development expense for the quarter ended March 31, 1998. The
Research and Development expense during the first quarter of 1999 is associated
with the development by the Company of two new products in connection with a
contract for the marketing and resale of such products entered into with an
Atlanta, Georgia-based company that specializes in the nationwide marketing of
products to bank credit card holders.
Non-cash imputed compensation decreased by $39,345 from $49,640 for the quarter
ended March 31, 1998 to $10,295 for the quarter ended March 31, 1999. In
December 1998, the Company wrote off the balance of the deferred compensation
associated with the future services to be provided by the Company's former
Chairman and Chief Executive Officer. In March, 1999, the Company's former
Chairman and Chief Executive Officer was terminated for "cause" under his
employment agreement with the Company. The Company no longer incurs the expense
associated with these services. However, the Company has entered into a
settlement agreement with the Company's former Chairman and Chief Executive
Officer which requires periodic payments to him and/or his spouse. See "Part II,
Legal Proceedings."
Amortization of goodwill was $27,415 for the quarter ended March 31, 1999
compared to $21,665 for the quarter ended March 31, 1998, an increase of $5,750.
The increase in the amortization of goodwill is attributable to the goodwill
purchased in connection with the QCC Acquisitions.
Income from operations for the quarter ending March 31, 1999 was $155,629, which
represents a decrease of $241,880 over the income from operations of $377,757
for the quarter ending March 31, 1998. Net income decreased to $85,067 for the
quarter ended March 31, 1999 from $270,757 for the quarter ended March 31, 1998
for the aforementioned reasons.
ENGINEERED BUSINESS SYSTEMS, INC.
Sales for Engineered Business Systems accounted for $1,677,999 or 80% of the
Company's total revenue for the quarter ended March 31, 1999 compared to
$1,687,365 or 100% of the Company's total revenue for the quarter ended March
31, 1998. The revenue mix for the quarter ended March 31, 1999 was comprised of
recurring revenue from the ACES product line, the CRIS product line, annual
software maintenance contracts, technical support revenues, revenues generated
on a transactional per report basis and monthly software rental programs
("Recurring Revenue") (36%), outsourcing services (35%), software sales (22%)
and consulting services of (7%). The comparable revenue mix for the quarter
ended March 31, 1998 was Recurring Revenue (48%), outsourcing services (31%),
software sales (21%) and consulting services (0%). Sales of the recently
released DESC product, revenue derived from the emerging consulting practice,
and steady growth of outsourcing service revenues offset declines in the CRIS
transactional and ACES software sales. Management believes that the lack of
growth in sales for the first quarter of 1999 as compared to the first quarter
of 1998 is due to several factors, including the continued merger and
acquisition activity within the Company's wholesale client base, development
delays of network interfaces effecting the CRIS transactional base, overall
business disruption brought about by the recent move of the Company's
headquarters facility, and the diversion of management's attention away from
operations due to the legal proceedings resulting in the termination of the
Company's former Chairman and
11
<PAGE>
Chief Executive Officer. See "Legal Proceedings." Cost of sales as a percentage
of revenue increased from 16% for the quarter ended March 31, 1998 to 20% for
the quarter ended March 31, 1999. Management believes that the increase is due
to the shift in the Company's product mix from higher margin CRIS transactional
revenue to lower margin outsourcing services. The Company's gross margins for
the quarter ended March 31, 1999 was 80% compared to 84% for the quarter ended
March 31, 1998.
QUICKCREDIT CORP.
QCC was formed, under the laws of the State of Florida, on February 23,1998 for
the purpose of acquiring and operating formerly independent credit bureaus. QCC
had no operations from its inception until the second quarter of 1998.
Total revenues for the three months ended March 31, 1999 were $413,080 and cost
of sales was $345,033. Gross profit as a percentage of revenues was 16% for the
three months ended March 31, 1999. Management believes that the gross profit as
a percentage of revenue for the first quarter was adversely effected by a
reduction of sales caused by several factors including delays in the release of
software upgrades that facilitated the latest releases of the QCC software, the
seasonality of the retail credit business in the first quarter and the
relocation of the Company's headquarters and the legal proceedings with the
Company's former Chairman and Chief Executive Officer discussed above.
STOCKHOLDERS' AGREEMENT
As of April 16, 1999, shareholders of the Company beneficially holding an
aggregate of 6,368,454 shares of Common Stock, or 45.8% of the total number of
shares outstanding, entered into a Stockholders Agreement pursuant to which the
participating shareholders (the "Participating Shareholders") agreed to certain
matters pertaining to the governance of the Company and the circumstances under
which the shares held by the Participating Shareholders may be sold or
transferred. The Participating Shareholders agreed, among other things, that (i)
at any annual or special meeting of stockholders called for the purpose of
voting on the election of directors, or by consensual action of stockholders
with respect to the election of directors, the Participating Shareholders will
vote the shares of the Company's Common Stock held thereby in favor of the
directors nominated by Harold S. Fischer, the Company's Chief Executive Officer
and President, and (ii) except for certain permitted transfers, each
Participating Shareholder will not sell or transfer shares of the Company's
Common Stock held thereby without first granting the Company and then the other
Participating Shareholders with a right of first offer. Although the Company is
not a party to the Stockholders Agreement, certain members of management are
Participating Shareholders, including Harold S. Fischer, the Company's Chief
Executive Officer and President.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its working capital and capital expenditures requirements
with cash provided from operations, the private sale of the Company's stock, and
debt financing. In 1999 the primary source of cash receipts will be from
payments for software and services. The Company's management believes that cash
flows from continuing operations will be sufficient to fund operational
expenditures in the immediate future and that planned expansion will be funded
with cash from operations, and proceeds from the issuance of equity and debt
financing.
Management estimates the future spending for capital expenditures during the
1999 fiscal year, will be approximately $300,000 and believes that the current
and future cash flows from sales and proceeds from debt and equity financing
will be sufficient to fund planned capital expenditures.
12
<PAGE>
During the period ended March 31, 1999, the Company issued 416,813 shares of
common stock for a total value of $416,813 and issued an additional 45,000
shares of common stock in lieu of a cash payment to a former principal of one of
the acquired credit bureaus. See Part II "Changes in Securities and Use of
Proceeds."
At March 31, 1999, the Company had working capital of $59,328 as compared to
working capital of $712,557 at March 31, 1998. The reduction in working capital
is attributable primarily to expenses associated with the relocation of the
Company's headquarters, research and development costs, and legal fees and
expenses and a reduction in revenues during the quarter ended December 31, 1998
associated with the litigation resulting in the termination of the Company's
former Chairman and Chief Executive Officer.
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
it has achieved this objective. 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.
13
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
During the first quarter of 1999 the Company was a defendant in the lawsuit
styled, THOMAS L. BAUER, ET AL V. TRIANGLE IMAGING GROUP, INC., VITO A.
BELLEZZA, JUDITH BELLEZZA A/K/A JUDITH KLOTZ, PETER BELLEZZA AND FRANZ FIDELI in
the Circuit Court of the 17th Judicial Circuit in and for Broward County,
Florida filed in December 1998 by in excess of 25 of the Company's shareholders
some of whom are officers and employees of the Company (the "Shareholder
Litigation"). The Shareholder Litigation alleges, among other things, breaches
of fiduciary duty, self-dealing, stock manipulation and insider trading by Mr.
Bellezza, the Company's former Chief Executive Officer and Chairman of the
Board. The lawsuit further alleges certain claims against Judith Bellezza for
her alleged participation in Mr. Bellezza's complained of activities, as well as
claims against Franz Fideli and Peter Bellezza arising from the failure to
discharge their fiduciary duties as directors of the Company when presented with
the allegations against Mr. Bellezza and Judith Bellezza.
On January 14, 1999, a hearing was held before the Circuit Court for Broward
County, Florida with regard to the Shareholder Litigation and an order was
entered by the Court on February 22, 1999 (the "Order").
The Order, among other things, required the parties to submit their dispute to
non-binding mediation. On April 30, 1999, the Company attended the required
mediation conference and entered into a settlement agreement (the "Agreement")
with Vito A. Bellezza, the Company's former Chief Executive Officer and Chairman
of the Board of Directors, Judith Bellezza, Mr. Bellezza's wife and a former
employee of the Company, Peter Bellezza, Mr. Bellezza's brother and a former
director of the Company, and Franz Fideli, a former director of the Company. The
Agreement includes a general release of all claims by the parties against all
other parties and also (i) requires Messrs. Bellezza, Fideli and Peter Bellezza
to surrender for cancellation (a) an aggregate of 900,000 shares of the
Company's Common Stock and (b) options to purchase an aggregate of 2,200,000
shares of the Company's Common Stock at exercise prices ranging from $.05 per
share to $1.875 per share, (ii) grants the Company's Board of Directors the
right to vote, subject to certain limitations, all shares of the Company's
Common Stock owned by such individuals (presently believed to be 3,317,136
shares) in accordance with the majority vote of the other shareholders of the
Company's Common Stock, and (iii) requires that the Company pay to Vito Bellezza
and/or Judith Bellezza a total of $468,000 over a period of three (3) years and
to provide them with health and dental insurance coverage. As a result of the
execution and delivery of the Agreement, Mr. Bellezza and the other defendants
in the lawsuit will not serve as officers or directors of the Company and will
not otherwise be involved in the day-to-day activities of the Company in any
capacity. It is expected that the Agreement will be superseded by a more
comprehensive, definitive settlement agreement in the near future; provided
however, that if such a definitive settlement agreement is not executed by the
parties by May 26, 1999, the Agreement remains binding and enforceable in
accordance with its terms. Any disputes arising from the drafting and
negotiating of the definitive settlement agreement shall be resolved by the
mediator.
In addition to the foregoing, in January 1999, Waterside Capital Corporation
("Waterside") sued the Company (the "Waterside Litigation") in the United States
District Court for the Eastern District of Virginia, Civil Action No. 2:98 cv
1468, based upon alleged defaults by the Company under a promissory note in the
original principal amount of $1,500,000, dated October 15, 1998, and alleged
breaches of contract under certain related investment agreements. The Company
and Waterside reached a settlement of the litigation pursuant to which the
Company repriced certain stock purchase warrants previously granted to Waterside
at the time of the closing of Waterside's investment in the Company. Pursuant to
the settlement, the exercise price of the warrants was reduced from a In
addition to the foregoing, in January, 1999, Waterside Capital Corporation
("Waterside") filed a lawsuit against the range of $2.15 per share to $3.00 per
share down to
14
<PAGE>
$.05 per share. In exchange for the repricing of the warrants, Waterside
dismissed the Waterside Litigation and delivered to the Company a contingent
general release. The release provides that Waterside may not refile the lawsuit
with the same claims set forth in the Waterside Litigation unless certain
members of management and/or members of the Company's Board fail to remain in
such positions through the date of the second annual meeting of shareholders
held after the date of the settlement.
Item 2. Changes in Securities and Use of Proceeds
In January 1999, the Company issued 301,813 shares of Company common stock to
certain individual accredited investors for an aggregate purchase price of
$301,813 pursuant to Section 4(2) of the Securities Act of 1933 (the "Act").
In February 1999, the Company issued 115,000 shares of Company common stock to
certain individual accredited investors for an aggregate purchase price of
$115,000 pursuant to Section 4(2) of the Act.`
During March 1999, the Company also issued an additional 45,000 shares of
Company common stock in lieu of certain cash payment obligations to a former
principal of a credit bureau acquired by the Company in the second quarter of
1998, pursuant to Section 4(2) of the Act.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
None.
B. Reports on Form 8-K
Current Report on Form 8-K dated January 5, 1999, Item 5
Current Report on Form 8-K dated January 21, 1999, Item 5
15
<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: May 13, 1999 By: /s/ Harold S. Fischer
-----------------------------------------
Harold S. Fischer, President,
Chief Executive Officer and Director
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated financial statements for the fiscal quarter to March 31,
1999 as presented in the Company's Form 10-QSB for such period and is qualified
by reference to such financial statements.
</LEGEND>
<CIK> 0000764763
<NAME> Triangle Imaging Group, Inc.
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 59,328
<SECURITIES> 0
<RECEIVABLES> 1,220,332
<ALLOWANCES> 96,187
<INVENTORY> 0
<CURRENT-ASSETS> 1,325,837
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14,143,791
0
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</TABLE>
