U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to .
Commission File Number 0 - 14835
TRANSNATIONAL INDUSTRIES, INC.
(Name of small business issuer as specified in its charter)
Delaware 22-2328806
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
Post Office Box 198
U.S. Route 1
Chadds Ford, Pennsylvania 19317
(Address of principal executive offices)
(610) 459-5200
(Issuer's telephone number)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Act during the past 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
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
Common stock, $0.20 par value
Outstanding at November 30, 1998: 502,470
Transitional Small Business Disclosure Format (check one):
YES NO X
<PAGE>
TRANSNATIONAL INDUSTRIES, INC.
INDEX PAGE
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheets -- October 31, 1998,
and January 31, 1998. 3-4
Condensed consolidated statements of operations -- Three
months ended October 31, 1998 and 1997; nine months ended
October 31, 1998 and 1997. 5
Condensed consolidated statements of cash flows -- Nine
months ended October 31, 1998 and 1997. 6
Notes to condensed consolidated financial statements --
October 31, 1998. 7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-14
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Transnational Industries, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
October 31 January 31,
1998 1998
----------- -----------
Assets (Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash $ 466 $ 471
Accounts receivable 1,915 737
Inventories 1,152 1,412
Other current assets 141 135
----------- -----------
Total current assets 3,674 2,755
Machinery and equipment:
Machinery and equipment 2,744 2,675
Less accumulated depreciation 2,109 1,927
----------- -----------
Net machinery and equipment 635 748
Other assets:
Repair and maintenance inventories, less provision
for obsolescence 165 165
Computer software, less amortization 488 322
Excess of cost over net assets of business acquired,
less amortization 1,842 1,893
----------- -----------
Total other assets 2,495 2,380
=========== ===========
Total assets $ 6,804 $ 5,883
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
Transnational Industries, Inc.
Condensed Consolidated Balance Sheets (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
October 31 January 31,
1998 1998
----------- -----------
Liabilities and stockholders' equity (Unaudited) (Audited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 382 $ 468
Deferred maintenance revenue 787 641
Accrued expenses 248 224
Billings in excess of cost and estimated earnings 1,176 241
Current portion of long-term debt 229 215
----------- -----------
Total current liabilities 2,822 1,789
Long-term debt, less current portion 1,235 1,384
Stockholders' equity:
Series B cumulativeconvertible preferred stock,
$0.01 par value - authorized 100,000 shares;
issued and outstanding 318 shares (liquidating
value$149,460) 73 76
Common stock, $0.20 par value -authorized
1,000,000 shares; issued and outstanding 502,470
shares 100 100
Additional paid-in capital 8,491 8,479
Accumulated deficit (5,917) (5,945)
----------- -----------
Total stockholders' equity 2,747 2,710
----------- -----------
Total liabilities and stockholders' equity $ 6,804 $ 5,883
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
Transnational Industries, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31 October 31
------------------------ ------------------------
1998 1997 1998 1997
----------- ------------ ------------- ----------
<S> <C> <C> <C> <C>
Revenues $ 2,064 $ 1,540 $ 5,431 $ 5,625
Cost of Sales 1,461 1,061 3,772 3,978
----------- ------------ ------------- ----------
Gross Margin 603 479 1,659 1,647
Selling expenses 176 142 571 409
Research and development 115 99 352 318
General and administrative expenses 205 186 606 563
----------- ------------ ------------- ----------
496 427 1,529 1,290
----------- ------------ ------------- ----------
Operating income 107 52 130 357
Interest expense 26 35 96 95
----------- ------------ ------------- ----------
Income before income tax 81 17 34 262
Provision for income taxes 6 - 6 14
----------- ------------ ------------- ----------
Net income before extraordinary item 75 17 28 248
Extraordinary gain on elimination of debt 345
----------- ------------ ------------- ----------
Net income 75 17 28 593
Preferred dividend requirement 2 12 6 36
=========== ============ ============= ==========
Income applicable to common shares $ 73 $ 5 $ 22 $ 557
=========== ============ ============= ==========
Basic income per common share
Before extraordinary item $ 0.15 $ 0.02 $ 0.04 $ 0.57
Extraordinary gain on elimination of debt - - -- 0.92
----------- ------------ ----------- ------------
$ 0.15 $ 0.02 $ 0.04 $ 1.49
=========== ============ ============= ==========
Diluted income per common share
Before extraordinary item $ 0.14 $ 0.01 $ 0.04 $ 0.56
Extraordinary gain on elimination of debt - - -- 0.90
----------- ------------ ------------- ----------
$ 0.14 $ 0.01 $ 0.04 $ 1.46
=========== ============ ============= ==========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
Transnational Industries, Inc.
Condensed Consolidated Statements
of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
Nine Months Ended
October 31,
--------------------
1998 1997
---------- ---------
<S> <C> <C>
Net cash provided (used) by operating activities $ 399 $ 380
Net cash provided (used) by investing activities (237) (172)
Net cash provided (used) for financing activities (167) (229)
---------- ---------
Increase (decrease) in cash (5) (21)
Cash at beginning of period 471 953
---------- ---------
Cash at end of period $ 466 $ 932
========== =========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
Transnational Industries, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
October 31, 1998
Note A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Regulation
S-B. 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 have been included. All such adjustments are of a normal
recurring nature. Operating results for the three month and nine month periods
ended October 31, 1998, are not necessarily indicative of the results to be
expected for the fiscal year. For further information, refer to the consolidated
financial statements and footnotes thereto for the year ended January 31, 1998,
contained in the Registrant's Annual Report on Form 10-KSB for the year ended
January 31, 1998.
Note B - NEW ACCOUNTING PRONOUNCEMENTS.
SFAS No. 130, Reporting Comprehensive Income, establishes standards for the
reporting and display of comprehensive income in financial statements. SFAS No.
131, Disclosures about Segments of an Enterprise and Related Information,
changes the way public companies report segment information in financial
statements. The Statements become effective for all financial statements for
fiscal years beginning after December 15, 1997. The Company has reviewed those
Statements and does not believe that they will have a material impact on its
financial statements and related disclosures.
Note C - COMMON AND PREFERRED STOCK
In August 1998 the company issued 1500 shares of its authorized Common in
exchange for 12 shares of the Company's Series B Cumulative Convertible
Preferred Stock (Preferred), which were retired. The terms of the exchange were
the same as those offered to all the holders of the Preferred in September 1997.
There remains 318 shares of Preferred outstanding whose holders have not
responded to the solicitation and their shares will remain outstanding, unless
either (i) the shares are redeemed or converted in accordance with the original
contractual terms of the Preferred or (ii) the holders of the Preferred request
and the Company agrees to exchange their shares at a future time (which neither
side is obligated to do and which, if done, would be at an exchange ratio to be
negotiated in conjunction therewith).
7
<PAGE>
Note D - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share (dollars in thousands except per share data):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31 October 31
-------------------------- --------------------------
1998 1997 1998 1997
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Numerator (same for basic and dilutive):
Net income before extraordinary gain $ 75 $ 17 $ 28 $ 248
Preferred dividend requirement 2 12 6 36
------------- ------------ ------------ -------------
Net income before extraordinary gain
available to common stockholders 73 5 22 212
Extraordinary gain on elimination of debt -- -- 345
============= ============ ============ =============
Net income available to common stockholders $ 73 $ 5 $ 22 $ 557
============= ============ ============ =============
Denominator:
Weighted average shares outstanding for basic earnings per
share 502,470 324,220 501,470 372,626
Dilutive effect of employee stock options 1,951 22,720 8,524 8,688
============= ============ ============ =============
Weighted average shares outstanding and assumed conversions
for dilutive earnings per share 504,421 346,940 509,994 381,314
============= ============ ============ =============
Basic income per share:
Before extraordinary gain $ .15 $ .02 $ .04 $ .57
Extraordinary gain on elimination of debt -- -- -- .92
============= ============ ============ =============
Total $ .15 $ .02 $ .04 $ 1.49
============= ============ ============ =============
Dilutive income per share:
Before extraordinary gain $ .14 $ .01 $ .04 $ .56
Extraordinary gain on elimination of debt -- -- -- .90
============= ============ ============ =============
Total $ .14 $ .01 $ .04 $ 1.46
============= ============ ============ =============
</TABLE>
Common shares potentially issuable under the contractual conversion rights of
the Preferred B shares would have an antidilutive effect on earnings per share
and therefore have not been included in the above computations. Weighted average
common shares issuable under the contractual conversion rights of the Preferred
B shares amounted to 1,941 and 10,259 in each of periods ended October 31, 1998
and 1997, respectively.
8
<PAGE>
Note E -- CONTINGENCIES
In 1995, Spitz became involved in a dispute in connection with a public bid for
the supply of planetarium equipment for an expansion project at a public
community college. Spitz's subcontract bid was the lowest submitted and the
general contractor for the project allegedly used Spitz's pricing in submitting
its total contract bid to the college. After the total contract was awarded to
the general contractor, however, the college's architect alleged that Spitz's
equipment did not conform to the bid specifications. The bid for the equipment
which the architect deemed to be in conformance with the specifications was
allegedly approximately $150,000 higher than Spitz's bid. Because the Contractor
has been forced to supply the more expensive equipment, it is attempting to
recover the $150,000 price differential plus alleged related amounts due to
adverse impacts on the project schedule from various parties. At various times,
the Contractor has threatened to assert its claim against Spitz because it has
been unsuccessful in its attempts to recover its alleged damages from the
College or other involved parties. The Company believes the bid specifications,
to the extent that they excluded Spitz's equipment, constituted an improper
sole-source of equipment which violates competitive bidding laws because the
specifications appear to have been copied from a competitor's equipment. The
Company also believes that the Spitz equipment meets all of the valid functional
requirements in the bid specifications. No lawsuit has been filed against Spitz
or the Company and the parties have discussed settling the matter. The
Contractor has not communicated any threats to carry out its assertion against
Spitz since July 1996, but it has indicated to Spitz that proceedings continue
in an effort to recover damages from the other parties involved. The Company
believes that the parties will reach an agreement to resolve the dispute without
litigation involving Spitz. It is too early to estimate a probable outcome and
its effect, if any, on Spitz. Accordingly, no liability for the potential claim
has been recorded at October 31, 1998.
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of operations
Revenues in the third quarter and first nine months of fiscal 1999 were
$2,064,000 and $5,431,000 compared to $1,540,000 and $5,625,000 in the
comparable periods of fiscal 1998. The increase of $524,000 (34%) for the
quarter was due to higher revenues from the sale of both domes and planetarium
systems. The decrease of $194,000 (3%) for the nine month period resulted from
lower dome and ImmersaVision revenues which more than offset higher planetarium
revenues. In the third quarter of fiscal 1999, work commenced on the second sale
of an ElectricSky system resulting in ImmersaVision revenue during fiscal 1999
of $13,000 compared to $177,000 for the first nine months of fiscal 1998. The
ImmersaVision revenue in fiscal 1998 was attributable to the first sale of an
ElectricSky system which was completed in May 1997. Planetarium revenues were
$1,045,000 and $2,229,000 in the third quarter and first nine months of fiscal
1999 compared to $677,000 and $2,126,000 in the comparable periods of fiscal
1998, an increase of $368,000 (54%) for the quarter and $103,000 (5%) for the
nine month period. The increase in planetarium revenues for the quarter was due
to several new orders for new and refurbished systems for the educational market
booked in the second and third quarters of fiscal 1999. For the first nine
months of fiscal 1999, the second and third quarter increases were partially
offset by low planetarium revenues in the first quarter resulting from the
winding down of work on previous orders. Planetarium revenues include amounts
attributable to the sale of maintenance and parts of $308,000 and $890,000 in
the third quarter and first nine months of fiscal 1999 compared to $326,000 and
$1,028,000 in the comparable periods of fiscal 1998, a decrease of $18,000 (5%)
and $138,000 (13%), respectively. The decrease in maintenance and parts revenues
was due to lower sales to customers without preventive maintenance agreements as
well as the timing of performance on preventive maintenance agreements. Dome
revenues were $1,006,000 and $3,189,000 in the third quarter and first nine
months of fiscal 1999 compared to $863,000 and $3,322,000 in the comparable
periods of fiscal 1998, an increase of $143,000 (17%) for the quarter and a
decrease of $133,000 (4%) for the nine month period. Higher 1999 dome revenues
from all of the various markets were offset by lower revenues from ride
simulator domes.
New sales order bookings have increased after a slow start in Fiscal 1999,
increasing the current backlog of unearned revenue to approximately $10,500,000.
About eighty percent of the revenue backlog is scheduled for delivery through
the end of fiscal 2000. Bookings have been strong for all of the Company's
products and include two ElectricSky systems, with optical planetarium
projectors and domes, for two new visitor attractions. In addition, sales
prospects remain strong in all of the various markets. The new orders and other
promising sales prospects are expected to positively impact revenues in the
remainder of fiscal 1999 and beyond. While revenue levels are expected to
increase over the next year, uncertainty in the timing and delivery of new sales
are expected to cause revenue levels to continue to fluctuate in future interim
periods.
Gross margins decreased to 29.2% in the third quarter and increased to 30.5% in
the first nine months of fiscal 1999 compared to 31.1% and 29.3% in the
comparable periods of fiscal 1998. In the first nine months of fiscal 1999,
margin improvements resulting from successful efforts on most of the current
projects were partially offset by a lower margin on a project which required a
10
<PAGE>
subcontract to supply a special device to rotate a large film theater dome.
Gross margins in the third quarter and first nine months of fiscal 1998 were
weighted down by low gross margins on dome installation activity, unanticipated
cost on certain planetarium refurbishment projects and introductory pricing on
the sale of the first ImmersaVision system. The low margins on dome installation
activity in fiscal 1998 resulted from the lower profit margins on change orders
to recover additional costs as dictated by construction contract terms. Selling
expenses increased $34,000 (24%) and $162,000 (40%) in the third quarter and
first nine months of fiscal 1999 compared to the comparable periods of fiscal
1998. The increase in selling expenses is due to the use of engineering
resources in sales proposal efforts, increased travel expense for foreign sales
presentations, and the introduction of ImmersaVision products. Research and
development expenses increased $16,000 (16%) and $34,000 (11%) in the third
quarter and first nine months of fiscal 1999 compared to the comparable periods
of fiscal 1998. Increases are due to research and development of proprietary
programming tools for software content development for ImmersaVision,
improvements to ImmersaVision subsystems, and improvements to optical
planetarium products. Research and development efforts are expected to continue
at increasing levels in future periods. Fluctuating research and development
expenses in the past have been attributable to the deployment of engineering
personnel to work on selling and customer contract related tasks. Through
organizational changes and a more constant volume of customer contract activity
the Company is deploying a more constant level of engineering resources to
research and development projects which will be necessary to maintain and grow
the business. General and administrative expenses increased $19,000 (10%) and
$43,000 (8%) in the third quarter and the first nine months of fiscal 1999
compared to the comparable periods of fiscal 1998. Increases were due to new
employee recruitment costs and a $25,000 charge to account for questionable
accounts receivable. Otherwise, general and administrative expenses were
relatively constant.
Net interest expense amounted to $26,000 and $96,000 in the third quarter and
first nine months of fiscal 1999 compared to $35,000 and $95,000 in the
comparable periods of fiscal 1998. The $26,000 and $96,000 reported in the first
quarter and first nine months of fiscal 1999 consisted of $19,000 and $73,000
paid on bank debt agreements plus $7,000 and $23,000 paid on capital lease
obligations. The $35,000 and $95,000 reported in the first quarter and first
nine months of fiscal 1998 consisted of $31,000 and $100,000 paid on bank debt
agreements plus $8,000 and $17,000 paid on capital lease obligations, offset by
$4,000 and $22,000 of interest income earned on cash invested. The Company
continues to pay no federal income taxes as federal taxable income is offset by
the utilization of net operating loss carryforwards. The provision for income
taxes consists of state income taxes on net income reported through the nine
month periods.
As a result of the above, the Company reported net income of $75,000 and $28,000
in the third quarter and first nine months of fiscal 1999 compared to net income
before extraordinary item of $17,000 and $248,000 for the comparable periods of
fiscal 1998. In the second quarter of fiscal 1998, an extraordinary gain from
the elimination of debt of $345,000 was recorded as a result of the refinancing
of the Company's debt agreements. The addition of the extraordinary gain
resulted in net income of $593,000 for the first nine months of fiscal 1998.
Liquidity and Capital Resources
Net cash provided by operating activities was $399,000 in the first nine months
of fiscal 1999 compared to $380,000 provided in the first nine months of fiscal
1998. The $399,000 provided by operations in the first nine months of fiscal
1999 consisted of $334,000 provided from earnings plus $65,000 provided from
changes in operating assets and liabilities. The $380,000 provided by operations
in the first nine months of fiscal 1998 consisted of $501,000 provided from
earnings offset by $121,000 used by changes in operating assets and liabilities.
11
<PAGE>
The $399,000 provided by operations in the first nine months of fiscal 1999 was
offset by $167,000 of scheduled principal payments on debt obligations and
$237,000 invested in capital assets. The $380,000 provided by operations in the
first nine months of fiscal 1998 was offset by $152,000 of scheduled principal
payments on debt obligations, payment of $77,000 of expenses related to
refinancing transactions, and $172,000 invested in capital assets. The net
result was a $5,000 decrease in cash balances during the first nine months of
fiscal 1999 compared to a $21,000 decrease during the first nine months of
fiscal 1998.
The $237,000 invested in capital assets in the first nine months of fiscal 1999
consisted of $168,000 of computer software and $69,000 of various machinery and
equipment additions. The $172,000 invested in capital assets in the first nine
months of fiscal 1998 consisted of $81,000 of computer software and $91,000 of
various machinery and equipment additions. In addition, $32,000 and $235,000 of
computer hardware for the development of ImmersaVision software was financed
through capital leases in the first nine months of fiscal 1999 and fiscal 1998,
respectively.
At October 31, 1998 the balance on the revolving credit note remained at
$600,000 as it was at January 31, 1998. The unused borrowing capacity on the
$800,000 revolving credit agreement was $200,000 at October 31, 1998 and January
31, 1998. Additional liquidity was provided by remaining cash balances of
$466,000 at October 31, 1998 compared to $471,000 at January 31, 1998. The next
sources of liquidity are trade accounts receivable and contracts in process.
Trade accounts receivable increased $1,178,000 to $1,915,000 at October 31, 1998
compared to $737,000 at January 31, 1998. The increase in trade accounts
receivable was attributable mostly to advances on customer contracts. As a
result, liquidity available from contracts in process decreased by $927,000
during the nine month period. At October 31, 1998, billings exceeded net revenue
by $555,000 compared to $372,000 of net revenues in excess of billings at
January 31, 1998.
Total debt at October 31, 1998 was $1,464,000, a decrease of $135,000 from the
$1,599,000 at January 31, 1998. The decrease resulted from $167,000 of principal
payments on debt and lease obligations offset by a new lease obligation for
$32,000.
The existing debt agreements combined with current assets and cash flow from
operations, assuming reasonably consistent revenue levels, should provide the
Company with adequate liquidity for the foreseeable future.
Year 2000 Impact
The Year 2000 Issue is the result of computer programs being unable to
distinguish between the year 1900 and 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, or engage in
similar normal business activities.
The Company currently uses a combination of mini computer applications, micro
computer applications and manual procedures to account for and manage its
business processes. The very unique nature of the Company's business, its small
size, and the variety of activities it is involved in, along with past financial
constraints, have perpetuated the use of the current systems. The mini computer
applications are not currently Year 2000 compliant. Year 2000 corrections to the
mini computer applications have been proposed by vendors and consultants;
however, the Company believes that such changes could be costly and uncertain.
12
<PAGE>
Improvements in the Company's financial condition, the availability of more
affordable technology solutions, and anticipated increases in business volume
now justify major improvement to the Company's information systems. Therefore,
the Company has concluded that it would be better served by an alternative
solution. As part of this wider objective to improve its information systems,
the Company is evaluating its overall data processing resources and plans to
make substantial changes within the next twelve months. In this process, the
Company plans to select new products that are Year 2000 Compliant. The Company
has completed an analysis of its business processes and requirements which were
matched to the capabilities of available enterprise software products. A list of
enterprise software products best suited for the Company's business has been
compiled and a determination was made on the basic computer infrastructure
required to run the list of software products. The computer infrastructure is
expected to be installed within the next three months at an estimated cost
ranging from $63,000 to $87,000. Software evaluation and selection is also
planned over the next three months with installation and implementation over the
following six months. Cost of the enterprise software, installation and
implementation is estimated to range from $151,000 to $265,000. The cost is
expected to be capitalized and funded through operating cash flow and leasing of
computer hardware and software.
The Company is not integrated with and does not rely heavily on vendors',
clients' and other third parties' data processing systems. The bulk of the
Company's revenue is generated from new public or commercial projects.
Maintenance and parts revenue comes from repeat customers, mainly museums and
schools. As such, revenue is generally not dependent upon repeat sales to
commercial customers' inventory management systems or enterprise resource
planning systems the way many businesses may be. The Company uses a network of
vendors to obtain its parts and supplies. Many parts and supplies are
commodities available from numerous sources. The effect of critical vendors'
ability to continue to supply the Company though Year 2000 has not been
determined. However, the Company believes that the lack of integration with
vendors systems and numerous available sources will provide adequate protection
from vendors' Year 2000 potential problems.
The Company's products rely on a number of widely used third party software
products which claim to be Year 2000 compliant or do not perform date oriented
tasks. Evaluation and testing of the Year 2000 impact on software used in the
Company's products is planned in conjunction with other research and development
efforts over the next year. Evaluation and any required corrections are not
expected to have a material cost impact.
As a contingency plan, in the event that all of the necessary changes are not
completed by the Year 2000, the portions of the operations that rely on date
sensitive data can be accommodated by manual procedures and date adjustments to
existing software applications. The Company believes this contingency plan,
although not the most efficient solution, could be accomplished without a
material interruption to the Company's business.
In addition to the specific anticipated costs described above, the Company will
incur additional costs as salaried personnel utilize their time to work on Year
2000 matters. The Company does not anticipate that the use of internal personnel
will have a material adverse effect upon the company's operations or earnings;
however, the Company is not yet able to quantify such costs and, because the
Company has not reserved any amounts therefor, any amounts so expended will
reduce the Company's earnings. In addition, in the event that the economy as a
whole is materially and adversely effected by widespread interruptions, or by
failures of key infrastructure providers (such as banks and utilities), it is
likely that the Company's financial condition and results of operations would be
materially adversely effected.
13
<PAGE>
Forward-Looking Information
The statements in this Quarterly Report on Form 10-QSB that are not statements
of historical fact constitute "forward-looking statements." Said forward-looking
statements involve risks and uncertainties which may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performances or achievements, expressly predicted or implied by
such forward-looking statements. These forward-looking statements are identified
by their use of forms of such terms and phrases as "expects," "intends,"
"goals," "estimates," "projects," "plans," "anticipates," "should," "future,"
"believes," and "scheduled."
The important factors which may cause actual results to differ from the
forward-looking statements contained herein include, but are not limited to, the
following: general economic and business conditions; competition; success of
operating initiatives; operating costs; advertising and promotional efforts; the
existence or absence of adverse publicity; changes in business strategy or
development plans; the ability to retain key management; availability, terms and
deployment of capital; business abilities and judgment of personnel;
availability of qualified personnel; labor and employee benefit costs;
availability and costs of raw materials and supplies; and changes in, or failure
to comply with, government regulations. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward-looking statements included in this filing will
prove to be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and expectations of the Company will be achieved.
14
<PAGE>
II. OTHER INFORMATION
6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Description of Document
27 Financial Data Schedules
(b) The Registrant did not file any reports on Form 8-K during the three months
ended October 31, 1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TRANSNATIONAL INDUSTRIES, INC.
/s/ Paul L. Dailey, Jr.
-------------------------
Date: December 15, 1998 Paul L. Dailey, Jr.
Secretary-Treasurer
Signing on Behalf of Registrant
and as Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet of Transnational Industries, Inc. as of
October 31, 1998 and the related condensed consolidated statement of operations
and statement of cash flows for the nine months then ended and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> OCT-31-1998
<CASH> 466
<SECURITIES> 0
<RECEIVABLES> 1915
<ALLOWANCES> 0
<INVENTORY> 1152
<CURRENT-ASSETS> 3674
<PP&E> 2744
<DEPRECIATION> 2109
<TOTAL-ASSETS> 6804
<CURRENT-LIABILITIES> 2822
<BONDS> 0
0
73
<COMMON> 100
<OTHER-SE> 2574
<TOTAL-LIABILITY-AND-EQUITY> 6804
<SALES> 5431
<TOTAL-REVENUES> 5431
<CGS> 3772
<TOTAL-COSTS> 3772
<OTHER-EXPENSES> 352
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96
<INCOME-PRETAX> 34
<INCOME-TAX> 6
<INCOME-CONTINUING> 28
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
