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 March 31, 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 33-60296
Globalink, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 54-1473222
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9302 Lee Highway, 12th Floor, Fairfax, VA 22031
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (703) 273-5600
Not Applicable
(Former name, address and fiscal year, if changed since last report)
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
Registrant had 9,173,749 shares of common stock outstanding as of March 31,
1998.
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GLOBALINK, INC.
TABLE OF CONTENTS
Part I Financial Information: Page No.
Item 1. Financial Statements
Balance Sheets as of March 31, 1998,
and December 31, 1997 1
Statements of Operations for the Three
Months Ended March 31, 1998, and
March 31, 1997 2
Statements of Cash Flows for the Three
Months Ended March 31, 1998, and
March 31, 1997 3
Notes to Interim Financial Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
Part II Other Information:
Item 6. Exhibits and Reports on Form 8-K 11
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<TABLE>
<CAPTION>
Item 1. Financial Statements
GLOBALINK, INC.
BALANCE SHEETS
March 31, December 31,
1998 1997
---------------- ----------------
ASSETS (Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 872,796 $ 1,068,241
Marketable securities - -
Accounts receivable, net of allowances of
$3,536,602 and $2,693,826 12,434,546 11,200,143
Inventories 748,918 760,659
Prepaid expenses and deposits 709,298 791,415
Other receivables 46,057 37,134
---------------- ----------------
Total Current Assets 14,811,615 13,857,592
Long-Term Receivable 327,750 327,750
Equipment and Furniture, net of accumulated
depreciation of $1,259,867 and $1,144,766 572,203 587,783
Capitalized Software, net of accumulated
amortization of $5,462,012 and $5,299,793 609,125 641,821
---------------- ----------------
Total Assets $ 16,320,693 $ 15,414,946
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable - trade $ 3,018,253 $ 2,410,886
Accrued and other liabilities 1,116,861 832,847
Current portion of notes payable 1,674,356 1,484,356
---------------- ----------------
Total Current Liabilities 5,809,470 4,728,089
Long-Term Notes Payable 71,250 92,000
Deferred Rent 36,855 42,015
Stockholders' Equity:
Preferred stock, $.01 par value, 250,000 shares
authorized, 28,874 and 26,771 shares
issued and outstanding 798,580 755,354
Common stock, $.01 par value, 20,000,000 shares
authorized, 9,173,749 and 9,160,236 shares
issued and outstanding 91,737 91,602
Additional paid-in capital - common stock 22,154,406 22,143,154
Dividends payable 17,960 72,573
Accumulated deficit (12,659,565) (12,509,841)
---------------- ----------------
Total Stockholders' Equity 10,403,118 10,552,842
---------------- ----------------
Total Liabilities and Stockholders' Equity $ 16,320,693 $ 15,414,946
================ ================
<FN>
The accompanying notes are an integral part of these statements.
1
</FN>
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GLOBALINK, INC.
STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
1998 1997
---------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Product sales (net of returns and allowances) $ 3,815,774 $ 3,555,705
Translation service revenue 612,990 150,460
---------------- ----------------
4,428,764 3,706,165
Costs and Expenses:
Cost of products sold 422,402 475,689
Amortization of capitalized software 162,219 174,238
Direct labor and fringes 360,812 70,060
Development 227,616 223,227
Selling, marketing and other 2,386,290 1,788,783
Administrative 999,975 861,686
---------------- ----------------
4,559,314 3,593,683
---------------- ----------------
(Loss) Income From Operations (130,550) 112,482
Interest expense, net (19,174) (12,268)
---------------- ----------------
(Loss) Income Before Income Taxes (149,724) 100,214
Income tax expense - -
---------------- ----------------
Net (Loss) Income $ (149,724) $ 100,214
================ ================
(Loss) Earnings Per Common Share (Basic) $ (0.02) $ 0.01
================ ================
(Loss) Earnings Per Common Share (Diluted) $ (0.02) $ 0.01
================ ================
Weighted-Average Number of Common Shares (Basic) 9,164,740 5,578,230
================ ================
Weighted-Average Number of Common Shares (Diluted) 9,164,740 5,784,101
================ ================
<FN>
The accompanying notes are an integral part of these statements.
2
</FN>
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GLOBALINK, INC.
STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
1998 1997
---------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Net (loss) income $ (149,724) $ 100,214
---------------- ----------------
Adjustments to reconcile net (loss) income to net cash
used in operating activities
Amortization of capitalized software 162,219 174,238
Depreciation 115,101 104,471
Change in Assets and Liabilities
Increase in accounts receivable (1,234,403) (619,720)
Decrease in inventories 11,741 40,414
Decrease (increase) in prepaid expenses and deposits 82,117 (138,699)
Increase in other receivables (8,923) (115,693)
Increase in accounts payable 607,367 138,200
Increase in accrued and other liabilities 284,014 40,318
Decrease in deferred rent (5,160) (5,631)
---------------- ----------------
Total Adjustments 14,073 (382,102)
---------------- ----------------
Net cash used in operating activities (135,651) (281,888)
---------------- ----------------
Cash flows from investing activities
Decrease in marketable securities - (1,991,372)
Increase in capitalized software (129,523) (139,853)
Capital expenditures for equipment and furniture (99,521) (32,327)
---------------- ----------------
Net cash used in investing activities (229,044) (2,163,552)
---------------- ----------------
Cash flows from financing activities
Issuance of preferred stock - 2,381,776
Issuance of common stock and warrants - -
Preferred stock dividends - -
Issuance (repayment) of debt 169,250 (69,750)
---------------- ----------------
Net cash provided by financing activities 169,250 2,312,026
---------------- ----------------
Net decrease in cash and cash equivalents (195,445) (133,414)
Cash and cash equivalents at beginning of period 1,068,241 1,606,088
---------------- ----------------
Cash and cash equivalents at end of period $ 872,796 $ 1,472,674
================ ================
<FN>
The accompanying notes are an integral part of these statements.
3
</FN>
</TABLE>
<PAGE>
GLOBALINK, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE A -- Summary of Significant Accounting Policies
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles and with the instructions to Form
10-QSB. 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 (consisting only of
normal recurring accruals) considered necessary for a fair presentation have
been included. The results of operations for the interim period ended March 31,
1998, are not necessarily indicative of the results to be expected for the full
year. For further information, refer to the financial statements and the related
footnotes included in the Company's audited financial statements for the year
ended December 31, 1997.
NOTE B -- Composition of Certain Financial Statement Captions
1. Cash and Cash Equivalents
The Company considers all highly liquid securities purchased with a maturity of
three months or less to be cash equivalents.
2. Marketable Securities
Marketable securities include government debt securities which mature within one
year. The Company classifies debt securities as held-to-maturity.
Held-to-maturity securities are carried at amortized cost which equals estimated
fair value.
3. Inventories
Inventories consist of finished goods and work-in-process which are stated at
the lower of first-in, first-out (FIFO) cost or market.
4. Prepaid Expenses and Deposits
Prepaid expenses and deposits consist of a prepaid license, prepaid advertising
and brochures and other prepaid amounts. The prepaid license will be amortized
over the term of the license agreement. The Company expenses the costs of
first-time advertising when the material is published. Prepaid advertising and
brochures consist of advertising costs paid in advance of publication. Also
included in prepaid advertising and brochures expense are the costs of
developing various marketing and product materials for new software. These costs
are expensed when the software is released.
5. Equipment and Furniture
Equipment and furniture consist of office and other equipment and furniture and
fixtures. Depreciation is provided for in amounts sufficient to relate the cost
of depreciable assets to operations over their estimated service lives, ranging
from three to seven years. The straight-line method of depreciation is followed
for all assets for financial reporting purposes. Accelerated methods are used
for tax purposes.
6. Capitalized Software
The Company capitalizes certain initial software development costs and
enhancements thereto incurred after technological feasibility has been
demonstrated. To date, all products and enhancements thereto have utilized
proven technology. Such capitalized amounts are amortized commencing with
product introduction over the greater of the ratio of current gross revenue for
a product to the total expected gross revenue over the life of that product, or
the straight-line method over the remaining estimated economic life, ranging
from 24 to 36 months.
4
<PAGE>
NOTES TO INTERIM FINANCIAL STATEMENTS -- (Continued)
7. Accrued and Other Liabilities
Accrued and other liabilities consist of accrued salaries, commissions, payroll
taxes and fringe benefits, deferred income, accrued royalties and other accrued
liabilities.
8. Earnings Per Common Share
Basic earnings per common share excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted earnings per common share reflect the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity. Diluted
earnings per common share is computed similarly to fully diluted earnings per
common share pursuant to APB Opinion 15.
The following table reconciles basic and diluted earnings per common share for
the quarters ended March 31, 1998 and 1997:
Three months ended March 31,
1998 1997
----------------------------------
Numerator
Net (loss) income $ (149,724) $ 100,214
Preferred stock dividend (17,960) (32,411)
----------------------------------
Net (loss) income available to
common stockholders $ (167,684) $ 67,803
----------------------------------
Denominator
Weighted-average shares 9,164,740 5,578,230
Common equivalent shares - 205,871
----------------------------------
Diluted shares 9,164,740 5,784,101
----------------------------------
The loss per common share for the quarter ended March 31, 1998, does not include
the common equivalent shares because the effect of such inclusion would be to
decrease the loss per common share.
NOTE C - Related Party Transactions
During 1996, the Company loaned $95,000 to two officers. One officer was loaned
$25,000 at an interest rate of 9-1/4%, which was payable on demand and repaid
during 1997. A second officer was loaned $70,000 at an interest rate of 8% in
two separate promissory notes. Both notes were payable on or before December 1,
1997, with interest.
Additional notes were issued to the second officer during fiscal year 1997. On
December 17, 1997, all outstanding notes for this officer were consolidated into
one note of $327,750, including accrued interest. The note is a demand note with
an interest rate of 8.95% and is due in full, without demand notice, on December
17, 2000. As part of the agreement, this officer pledged 140,000 shares of
common stock as collateral.
NOTE D - Employment Agreements
The Company has entered into employment agreements with three employees. The
agreements are each for a three-year period commencing between March 1995 and
June 1996 and will renew automatically for succeeding periods of one year unless
sooner terminated. In the event the Company terminates without cause the
employment of any of these employees, the employee shall receive an amount equal
to one year's base salary plus accrued benefits and incentive compensation. The
agreements contain a provision which triples certain amounts due in the event of
a hostile takeover. The agreements also contain provisions for the accelerated
vesting of options if certain defined changes to the composition of the Board of
Directors should occur.
5
<PAGE>
NOTES TO INTERIM FINANCIAL STATEMENTS -- (Continued)
NOTE E - Warrants, Options and Other Stock Issued
1. Stock Options Issued
The Company issues options to employees and members of its Board of Directors
based on merit. The Company has accounted for its options under APB Opinion No.
25 and related interpretations. The options, which have a term of five years
when issued, are granted at various times during the year and vest based upon
individual grant specifications. The exercise price of each option equals or
exceeds the market price of the Company's stock on the date of grant. No
compensation cost has been recognized for employee options.
2. Prepaid Warrants Issued
During 1996, the Company sold three prepaid warrants to a private fund in the
amount of $500,000 each for a total of $1,500,000. Each warrant is convertible
into shares of common stock at the lower of $5.25 per share, or 85% of the
arithmetic average of the prior five days closing prices. As part of the
agreement, the Company also issued 33,613 options at an exercise price of $5.25
per share to the private fund. The options have a term of four years. In
addition, the Company issued 20,000 options at an exercise price of $5.25 per
share to both Tanner Unman Securities, Inc., and Prudential Securities, Inc.,
both of whom facilitated the agreement with the private fund. These options also
have a term of four years. As of December 31, 1997, the private fund had
converted the prepaid warrants into 526,832 shares of common stock.
3. Preferred Stock Issued
During 1996, the Company's Board of Directors approved a private placement of
Series A-2 8% convertible, redeemable preferred stock and associated stock
warrants. Dividends on the preferred stock are cumulative and payable annually
in arrears, beginning January 1, 1998, in either cash or additional shares of
preferred stock, at the option of the Company. The dividend is calculated as 8%
of the book value of the stock, based on its original trading price. The
preferred stock is convertible into ten shares of common stock any time after 30
days from the date of issuance. Any unconverted preferred stock remaining at
January 1, 2002, will automatically be converted into ten shares of common stock
per preferred share at that time. Each share of preferred stock was also issued
with one warrant entitling the holder to purchase ten shares of common stock
each at $4.18 per share. At March 31, 1998, and December 31, 1997, the Company
had outstanding 28,874 and 26,771 shares of Series A-2 preferred stock,
respectively, and 44,415 associated stock warrants.
In March 1997, the Company's Board of Directors approved a private placement of
Series A-3, convertible, redeemable preferred stock and associated stock
warrants. The Company sold 2,502 shares of Series A-3 preferred stock to a
private fund for a total of $2,502,000. Each share is convertible into shares of
common stock at the lower of $3.44 per share, or 85% of the arithmetic average
of the prior five days closing prices. As part of the agreement, the Company
also issued 85,568 options at an exercise price of $4.30 per share to the
private fund. The options have a term of four years. In addition, the Company
issued 25,020 options at an exercise price of $3.44 per share to Tanner Unman
Securities, Inc., and 20,000 options at an exercise price of $4.30 per share to
Prudential Securities, Inc., both of whom facilitated the agreement with the
private fund. These options also have a term of four years. As of December 31,
1997, the private fund had converted the Series A-3 preferred stock into
2,382,268 shares of common stock.
4. Common Stock Issued
In October 1997, the Company's Board of Directors approved a private placement
of common stock units. The Company sold 727,274 units for a total of $1,000,000.
Each unit consisted of one share of common stock and one warrant which entitles
the holder to purchase one share of common stock at an exercise price of $1.75
per share. As part of the agreement, the Company also issued purchase options
for 72,727 additional units at an exercise price of $1.51 per unit to M. H.
Meyerson & Co. which served as the placement agent. These purchase options have
a term of five years.
6
<PAGE>
NOTES TO INTERIM FINANCIAL STATEMENTS -- (Continued)
NOTE F - Export Sales
The Company sells software abroad through distributors, dealers and mail orders.
During the three months ended March 31, 1998, export sales to Brazil and Germany
totaled $260,000 and $226,000, respectively, or approximately 6% and 5% of net
sales, respectively. During the corresponding period in 1997, export sales to
Canada and Brazil totaled $389,000 and $385,000, respectively, or approximately
11% and 10% of net sales, respectively. Total export sales for the three months
ended March 31, 1998 and 1997, were approximately $1,298,000 and $1,886,000,
respectively.
NOTE G - Concentration of Credit Risk
Due to the nature of the Company's business, sales to a few customers, primarily
software distributors and original equipment manufacturers (OEMs), have
accounted for a significant percentage of the Company's sales. During the three
months ended March 31, 1998, one customer accounted for 37% of net sales. During
the corresponding period in 1997, two customers accounted for 10% or more of net
sales each (in aggregate, representing 28% of net sales). Accounts receivable at
March 31, 1998, and December 31, 1997, include approximately $2,020,000 and
$1,805,000, respectively, in amounts due from the Company's significant
customer(s).
7
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
This Form 10-QSB contains historical information and forward-looking statements
within the meaning of Section 21E of the Private Securities Litigation Reform
Act of 1995, including material regarding the future business operations and
projected financial results of the Company. These forward-looking statements are
subject to risks and uncertainties which could cause the Company's actual
results to differ materially from the forward-looking statements. Such risks and
uncertainties, include, but are not limited to: general business conditions and
growth in the language translation industry and the economy; competitive
factors, such as competing language translation software products and services,
acceptance of new language translation software products and services and
pricing issues; timing of language translation software product and service
introductions; unanticipated costs, complications or delays in product
development; fluctuations in customer demand; risk of inventory obsolescence due
to shifts in market demand; risk of nonpayment of material customer receivables;
continued success in current product enhancements and language translation
technology advances; risks associated with the sales of products in foreign
markets, including currency fluctuations; unanticipated costs or adverse effects
associated with distributors, vendors and suppliers; litigation involving
intellectual property, licensing and consumer issues; availability of sufficient
resources including short- and long-term financing to carry out the Company's
product development and marketing plans; and other unanticipated business risks
and uncertainties. In the context of the forward-looking information provided in
this Form 10-QSB, please refer to the Company's most recent Form 10-KSB and the
Company's other filings with the Securities and Exchange Commission.
The Registrant's net loss for the three months ended March 31, 1998, was
$150,000 compared to net income of $100,000 for the corresponding period in
1997. Revenues for the same three month period increased 20% to $4,429,000 from
$3,706,000.
Product sales for the three months ended March 31, 1998, increased 7% to
$3,816,000 from $3,556,000 for the corresponding period in the prior year. The
Company continues to open new distributor channels, increase growth in the
existing distributor channels and pursue additional OEM opportunities. The
Language Assistant Series Localized version and the Power Translator and
Language Assistant Series versions for Windows in CD-ROM media have been the
primary vehicles for sales to the Company's distributors and have been well
accepted. In addition, the Company introduced Power Translator Pro 6.2 in March
1997, Language Assistant 2.0 in September 1997 and Globalink Power Translator
for Workgroups in March 1998, all of which have also been well accepted and
contributed to sales during the period ended March 31, 1998.
International sales for the three months ended March 31, 1998, decreased 31% to
$1,298,000 from $1,886,000 for the corresponding period in 1997. The primary
exports have been to Europe, Canada and Latin America. International sales have
been primarily attributable to further development of the Company's network of
international distributors, along with additional OEM contracts entered into in
Latin America and Europe. The Company continues to experience revenue pressures
resulting from the increased efforts in reducing distributor inventory in the
channels, aligning sell-through campaigns with sales of products into the
channels and collecting existing receivable balances to provide for more
consistent sales cycles.
Translation Services revenue for the three months ended March 31, 1998,
increased 307% to $613,000 from $150,000 for the corresponding period in the
prior year. The increase in revenues for this group was a result of obtaining
larger jobs and establishing more long-term projects with the group's customers.
8
<PAGE>
Sales returns and allowances increased to $928,000 for the three months ended
March 31, 1998, compared to $716,000 for the corresponding period in 1997 due
primarily to the increase in product sales. The Company has continued its
efforts to reduce distributor inventory and align sell-through campaigns with
sales of products into the channels. Distribution agreements typically allow for
the return of certain merchandise to provide for stock balancing. The Company
continuously monitors these programs and makes appropriate accruals monthly to
handle future distribution stock balancing. The following table shows the gross
product sales, returns and net product sales for the periods indicated.
Three months ended March 31,
1998 1997
--------------------------------------
Gross Product Sales $ 4,744,000 $ 4,272,000
Returns (928,000) (716,000)
--------------------------------------
Net Product Sales $ 3,816,000 $ 3,556,000
--------------------------------------
Cost of products sold for the three months ended March 31, 1998, decreased 11%
to $422,000 from $476,000 for the corresponding period in the prior year. The
decrease in cost of products sold was primarily due to increased sales of the
Globalink Power Translator for Workgroups product which carries a much higher
gross profit margin than the Company's other products. Gross profit margin was
90% for the three months ended March 31, 1998, compared to 87% for the
corresponding period in 1997. The increase in gross profit margin was directly
attributable to the decrease in cost of products sold.
Amortization of capitalized software for the three months ended March 31, 1998,
decreased 7% to $162,000 from $174,000 for the corresponding period in the prior
year. The decrease is due to certain previously capitalized software development
costs becoming fully amortized in June of 1997. This was partially offset by the
release of new products in March and September of 1997 for which previously
capitalized software development costs began to be amortized.
Direct labor and fringes, which principally include charges for independent and
in-house translators within the translation services group, increased 415% for
the three months ended March 31, 1998, to $361,000 from $70,000 for the
corresponding period in 1997. These expenses increased from 47% to 59% as a
percentage of Translation Services revenues. This increase was primarily
attributable to the increased sales for this group and to fluctuations in the
number and relative size of jobs being performed, as the gross margin varies
with the nature and size of the job due to the fixed costs incurred and
administrative tasks performed.
Product development expenses, which consist of the current cost of
non-capitalizable development expenses, increased 2% for the three months ended
March 31, 1998, to $228,000 from $223,000 for the corresponding period in the
prior year.
Selling, marketing and other expenses, which include the costs of selling,
marketing, customer support, shipping and administration for product sales and
translation services, increased 33%, or $597,000, to $2,386,000 for the three
months ended March 31, 1998, from $1,789,000 for the corresponding period in
1997. This increase was primarily attributable to increased commissions and
increased promotion and advertising programs associated with the increase in
sales.
General and administrative expenses consist primarily of payroll and related
expenses, occupancy costs, travel and related expenses for senior management,
finance and accounting, legal and administration. For the three months ended
March 31, 1998, these expenses increased 16%, or $138,000, to $1,000,000 from
$862,000 for the corresponding period in the prior year. The increases occurred
primarily in the areas of payroll, legal and accounting fees, recruiting, rent
and depreciation as a result of additional expenses incurred to support the
growth of the Company.
Interest expense was $19,000 for the three months ended March 31, 1998, compared
to $12,000 for the corresponding period in 1997. This was due to interest
expense incurred as a result of draws on the Company's revolving and equipment
lines of credit.
9
<PAGE>
Income Tax Expense
No provision for income taxes was required due to the Company's net operating
loss ("NOL") carryforwards. Approximately $10,478,000 of NOL carryforwards
existed at December 31, 1997.
Accordingly, the NOL carryforwards at March 31, 1998, are sufficient to cover
any potential income tax expense generated as a result of any future earnings
reported.
Liquidity and Financial Resources
The Company anticipates that the net proceeds from the sale of the prepaid
warrants and the issuance of the preferred and common stock units, together with
cash flow from operations, existing cash balances and periodic borrowings under
the Company's bank lines of credit, will be adequate to meet the Company's
expected cash requirements through 1998.
While operating activities may provide cash in certain periods, to the extent
the Company experiences growth in the future, the Company anticipates that its
operating and product development activities, along with extended payment terms
for certain distributors, may use cash and, consequently, such growth may
require the Company to obtain additional sources of financing. There can be no
assurances that unforeseen events may not require more working capital than the
Company currently has at its disposal.
If additional funds are raised through the issuance of equity or convertible
securities, the Company's current shareholders will experience additional
dilution. While management of the Company believes additional funding will be
available if and when needed, there can be no assurance that additional
financing will be available on terms acceptable to the Company, if at all. The
inability to obtain additional financing, if and when needed, would have a
material adverse effect on the Company.
The Company has experienced certain payment delays from some of its OEM
customers due to various factors, such as, local banking regulations in Brazil
and tax withholding requirements in other countries. The Company has also filed
suit against one customer in France, which represents approximately $1,547,000
of overdue OEM receivables. The case will be heard in May 1998 and management
believes it is probable that the balance of this receivable will be fully
collected. The Brazilian economy has experienced significant shifts and currency
fluctuations during the last several years. With the introduction of the
Portuguese version of Power Translator Pro 6.2 in March 1997, the Company
experienced significant revenue generation in the Brazilian market. Accounts
receivable at March 31, 1998, included approximately $3,596,000 due from
Brazilian partners. While the Company has experienced some delays in scheduled
payments from such partners, it is management's belief that payments will be
made in full over the next several months. Management of the Company works
closely with its partners on a continuous basis in order to insure timely
collection of amounts owed to the Company. If the Brazilian economy were to
worsen significantly, timeliness of cash receipts from these partners could be
jeopardized and thus adversely impact the Company's overall working capital
position.
The Company has secured a $1,500,000 revolving line of credit and a $750,000
equipment line of credit with First Union National Bank. As of March 31, 1998,
the Company had $1,500,000 outstanding under the revolving line of credit, which
is being used to finance accounts receivable and other working capital needs. In
addition, the Company had $326,000 outstanding under the equipment line of
credit which was used to finance furniture and equipment purchases.
Other than as discussed above, the Company is not aware of any known trends, or
uncertainties, that have had or are reasonably likely to have a material effect
on the Company's liquidity, capital resources or operations.
10
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None.
b. Reports on Form 8-K
None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
GLOBALINK, INC.
(Registrant)
Date: May 15, 1998 By:/s/Mark A. Paiewonsky
------------------------
Mark A. Paiewonsky
Chief Financial & Accounting Officer
12
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
March 31, 1998, Financial Statements and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
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0
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