<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1996
------------------------------
Commission file number 0-24404
--------
TRANSMEDIA EUROPE, INC.
-------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3701141
------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
11 ST. JAMES'S SQUARE, LONDON SW1Y 4LB, ENGLAND
- --------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
U.K. 011-44-171-930-0704
----------------------------------------------------
(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 outstanding of the issuer's common stock, $.00001 par
value, as of May 10, 1996: 11,426,680
<PAGE> 2
INDEX
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
PART I : CONDENSED FINANCIAL INFORMATION
ITEM 1 .......................................................................................... Pages 1-9
Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Operations for the three month periods
ended and six month periods ended March 31, 1996 (unaudited) and March 31, 1995
(unaudited).
Condensed Consolidated Balance Sheets as at:
- - September 30, 1995
- - March 31, 1996 (unaudited).
Condensed Consolidated Statements of Cash Flows for the six month periods ended
March 31, 1996 (unaudited) and March 31, 1995 (unaudited).
Consolidated Statement of Stockholders' Equity for the three month periods ended
March 31, 1996 (unaudited) and December 31,1995 (unaudited).
Notes to the Condensed Consolidated Financial Statements
ITEM 2 .......................................................................................... Pages 10-13
Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II: OTHER INFORMATION ..................................................................... Page 14
SIGNATURES ...................................................................................... Page 15
</TABLE>
<PAGE> 3
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
PART I: CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The condensed consolidated financial statements included herein have been
prepared in conformity with generally accepted accounting principles in the
United States and should be read in conjunction with the September 30, 1995 Form
10-K filing. The statements are unaudited but reflect all adjustments
(consisting only of normal recurring accruals) which, in the opinion of
management, are necessary for a fair presentation of the company's financial
position and the results of operations. The operating results for any interim
period presented are not necessarily indicative of the results to be expected
for the full year.
1
<PAGE> 4
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months Three months Six months Six months
ended ended ended ended
March 31, March 31, March 31, March 31,
1995 1996 1995 1996
(unaudited) (unaudited) (unaudited) (unaudited)
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 944,087 $ 726,930 $ 1,728,750 $ 1,524,204
Membership fees 162,319 131,415 268,443 277,432
Other income 25,000 - 50,000 -
----------- ----------- ----------- -----------
Total revenues and fees 1,131,406 858,345 2,047,193 1,801,636
Cost of sales (630,712) (484,621) (1,153,863) (1,016,136)
----------- ----------- ----------- -----------
Gross profit 500,694 373,724 893,330 785,500
Selling, general and
administrative expenses (771,265) (819,328) (1,560,548) (1,680,713)
----------- ----------- ----------- -----------
Loss from operations (270,571) (445,604) (667,218) (895,213)
Share of losses of associated company - (238,760) - (300,000)
Interest income 6,568 5,743 15,738 8,096
----------- ----------- ----------- -----------
Loss before income taxes (264,003) (678,621) (651,480) (1,187,117)
Income taxes - - - -
----------- ----------- ----------- -----------
Net loss before preferred share dividends (264,003) (678,621) (651,480) (1,187,117)
Preferred share dividends - (33,605) - (67,210)
----------- ----------- ----------- -----------
Net loss after preferred share dividends $ (264,003) $ (712,226) $ (651,480) $(1,254,327)
=========== =========== =========== ===========
Loss per common and
common equivalent share $ (0.02) $ (0.06) $ (0.06) $ (0.11)
Weighted average number of
common and common
equivalent shares outstanding 11,420,680 11,426,680 11,420,680 11,426,680
=========== =========== =========== ===========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
2
<PAGE> 5
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, March 31,
1995 1996
(unaudited)
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash (including temporary cash investments
of $ nil at March 31, 1996 and
$ 730,767 at September 30, 1995) $ 796,911 $ 2,960
Trade accounts receivable 131,555 183,051
Restaurant credits, (net of allowance for irrecoverable
credits of $ 173,157 at March 31,1996 and of $127,557
at September 30, 1995) 1,392,571 1,433,575
Lease deposits 66,400 63,080
Amounts due from related parties (note 3) 709,585 570,313
Other current assets 47,240 103,955
---------- ----------
TOTAL CURRENT ASSETS 3,144,262 2,356,934
NON-CURRENT ASSETS
Restaurant credits (net of allowance for irrecoverable credits of
$ 230,000 at March 31, 1996 and September 30, 1995) 230,000 230,000
(note 1c)
Investment in and advances to associated company 938,413 763,980
Property and equipment (net of accumulated
depreciation of $ 80,524 at March 31, 1996 and
$ 64,366 at September 30, 1995) 103,893 94,683
Intangible assets (net of accumulated
amortisation of $ 270,215 at March 31, 1996
and $ 216,172 at September 30, 1995) 1,405,112 1,351,069
---------- ----------
TOTAL ASSETS $5,821,680 $4,796,666
========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE> 6
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, March 31,
1995 1996
(unaudited)
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 109,422 $ 86,561
Trade accounts payable 322,901 236,450
Deferred membership fee income 356,814 217,998
Accrued liabilities 303,203 581,476
Amount due to related party 416,280 498,729
----------- -----------
TOTAL CURRENT LIABILITIES 1,508,620 1,621,214
NON-CURRENT LIABILITIES
Deferred license fee income 500,000 500,000
----------- -----------
Total liabilities 2,008,620 2,121,214
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $.00001 par value per share
Authorised 20,000,000 shares;
11,426,680 issued and outstanding at March 31, 1996
and September 30, 1995 114 114
6 1/2 % Convertible Preferred Shares, $0.01 par value per share
Authorised 5,000,000 shares:
590,857 issued and outstanding shares at March 31, 1996
and September 30,1995 5,909 5,909
Additional paid in capital 8,412,081 8,412,081
Unearned compensation -restricted stock (402,000) (240,000)
Accumulated deficit (4,213,404) (5,467,731)
Cumulative foreign currency translation
adjustment 10,360 (34,921)
----------- -----------
Total stockholders' equity $ 3,813,060 $ 2,675,452
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,821,680 $ 4,796,666
=========== ===========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE> 7
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months Six months
ended ended
March 31, March 31,
1995 1996
(unaudited) (unaudited)
--------- -----------
<S> <C> <C>
Cash flows from operating activities
- Net loss before preferred share dividends $(651,480) $(1,187,117)
Adjustment to reconcile net loss to net
cash used in operating activities:
- Depreciation and amortisation 70,858 75,052
- Amortisation of unearned compensation 162,000 162,000
- Provision for irrecoverable restaurant credits 55,300 45,600
- Share of losses of associated company - 300,000
Changes in assets and liabilities
- Trade accounts payable 83,224 (60,619)
- Accrued liabilities 22,246 249,316
- Deferred advances (1,022) -
- Restaurant credits (215,254) (216,410)
- Trade accounts receivable (22,669) (62,020)
- Lease deposits (724) 3,320
- Other current assets 8,694 (56,715)
- Deferred membership fees (124,082) (110,270)
--------- -----------
Net cash used in operating activities (612,909) (857,863)
Cash flows from investing activities
- Loans to related parties (315,094) (178,564)
- Repayment of related party loans 96,000 317,836
- Receipts from related parties 150,000 250,000
- Charges to related parties - (167,551)
- Purchase of equipment - (20,110)
- Loan to associated company - (125,567)
- Payment of preferred share dividends - (13,998)
--------- -----------
Net cash (used in)/provided by investing activities (69,094) 62,046
Cash flows from financing activities
- Bank overdraft 73,027 (14,107)
--------- -----------
Net cash from financing activities 3,933 47,939
Effect of foreign currency on cash 27,125 15,973
--------- -----------
Net (decrease) in cash and temporary
cash investments (581,851) (793,951)
Cash and temporary cash investments
at beginning of period 892,435 796,911
Cash and temporary cash investments --------- -----------
at end of period $ 310,584 $ 2,960
========= ===========
</TABLE>
Supplemental disclosures of cash flow information:
No amounts of cash were paid for income taxes and interest for each of the
periods presented.
See accompanying notes to the condensed consolidated financial statements.
5
<PAGE> 8
TRANSMEDIA EUROPE, INC.
Consolidated Statement of Stockholders' Equity (unaudited)
<TABLE>
<CAPTION>
NUMBER OF COMMON NUMBER OF PREFERRED ADDITIONAL
COMMON SHARES STOCK PREFERRED STOCK PAID- IN
SHARES CAPITAL
<S> <C> <C> <C> <C> <C>
Balance September 30, 1995 11,426,680 $114 590,857 $5,909 $8,412,081
Net loss after preferred
share dividends - - - - -
Compensation expense -
restricted stock - - - - -
---------- ---- ------- ------ ----------
Balance December 31, 1995 11,426,680 114 590,857 5,909 8,412,081
Net loss after preferred
share dividends - - - - -
Effect of foreign currency
translation - - - - -
Compensation expense -
restricted stock - - - - -
---------- ---- ------- ------ ----------
Balance March 31, 1996 11,426,680 $114 590,857 $5,909 $8,412,081
========== ==== ======= ====== ==========
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE UNEARNED ACCUMULATED TOTAL
FOREIGN CURRENCY COMPENSATION DEFICIT
TRANSLATION RESTRICTED STOCK
ADJUSTMENT
<S> <C> <C> <C> <C>
Balance September 30, 1995 $ 10,360 $(402,000) $(4,213,404) $3,813,060
Net loss after preferred
share dividends - - (542,101) (542,101)
Compensation expense -
restricted stock - 81,000 - 81,000
-------- --------- ----------- ----------
Balance December 31, 1995 10,360 (321,000) (4,755,505) 3,351,959
Net loss after preferred
share dividends - - (712,226) (712,226)
Effect of foreign currency
translation (45,281) - - (45,281)
Compensation expense -
restricted stock - 81,000 - 81,000
-------- --------- ----------- ----------
Balance March 31, 1996 $(34,921) $(240,000) $(5,467,731) $2,675,452
======== ========= =========== ==========
</TABLE>
See accompanying notes to the condensed financial statements.
6
<PAGE> 9
TRANSMEDIA EUROPE, INC.
Notes to the Condensed Consolidated Financial Statements
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The consolidated balance sheet as of September 30, 1995 was derived
from the Company's audited financial statements.
The information presented in the unaudited condensed consolidated
financial statements, in the opinion of management, reflects all
adjustments (consisting of normal recurring accruals) necessary for a
fair presentation of the results for all interim periods. The results
for any interim period presented are not necessarily indicative of the
results to be expected for the full year.
The Company filed a registration statement with the Securities and
Exchange Commission that was declared effective on August 8, 1994.
(b) Description of business
Transmedia Europe, Inc. ('the Company') was incorporated in Delaware on
February 9, 1993.
The Company's main business activity through its wholly owned
subsidiary company, Transmedia UK plc, is to make 'cash advances' to
restaurants for food and beverage credits from certain participating
restaurants, which are then recovered as the Company's cardholders
utilise their restaurant charge cards (see note 1(c)). Presently, the
Company's sole area of operations is in the United Kingdom, although a
joint venture has been established for future operations in France .
The Company has been granted a license, (the 'Transmedia License'), to
operate a specialised restaurant charge card business in Europe, Turkey
and the countries of the former U.S.S.R. by Transmedia Network Inc.
('Network'), a corporation which is incorporated in the United States
of America. The agreement to purchase the Transmedia License was
initially entered into by Conestoga Partners Inc. ('Conestoga'), a
corporation which is related to the Company by virtue of the majority
shareholding in Conestoga held by Edward J Guinan III, the President,
Chief Executive Officer, Chief Financial Officer and Director of the
Company (see note 3).
As of March 31, 1996, Transmedia Europe, Inc. had equity interests in
the following companies:
<TABLE>
<CAPTION>
Name Country of Incorporation % Owned
<S> <C> <C>
Transmedia Europe plc United Kingdom 100
Transmedia UK plc United Kingdom 100
Transmedia UK Inc. United States of America 100
Transmedia La Carte Restaurant S.A France 50
</TABLE>
On April 19, 1996 Transmedia La Carte Restaurant S.A. completed a
rights issue of common stock. The Company declined to subscribe,
accordingly its interest has been reduced to 33%.
7
<PAGE> 10
TRANSMEDIA EUROPE, INC.
Notes to the Condensed Consolidated Financial Statements
(c) Restaurant Credits
Restaurant credits represent the total advances made to participating
restaurants in exchange for credits less the amount by which these
credits are recouped by the Company as a result of Company cardholders
utilising their cards at participating restaurants. The amount by which
such credits are recouped amounts to approximately 50% of the retail
value of food and beverages consumed by cardholders. The Company
reviews recoverability of credits and establishes an allowance for
credits to restaurants that have ceased operations or whose credits may
not be utilised by cardholders.
The amount of funds advanced to participating restaurants are generally
unsecured and are recoverable as cardholders utilise their restaurant
charge card at the respective restaurant. In certain cases, the Company
may request a personal guarantee from the owner of a restaurant with
respect of the recoverability of the advance if the restaurant ceases
operations or ceases to be a participating restaurant. Generally, no
other forms of collateral or security are obtained from the restaurant
owners.
(d) Membership Fees
Membership fees collected are deferred and are recognized as revenue in
equal monthly instalments.
(e) License Cost
The Company evaluates the carrying value of its investment in License
Costs for impairment based on an estimate of future undiscounted net
cash flows that are expected to be generated and are directly
attributable to the Transmedia License. If the sum of those estimated
future undiscounted cash flows is less than the carrying value of the
license costs, it is the policy of the Company to measure impairment on
the basis of the fair value of the license costs, using a discounted
cash flow technique. In the opinion of management, there was no
permanent impairment in the carrying value of the license costs at
September 30, 1995 or at March 31, 1996.
2. INVESTMENT IN AND ADVANCES TO ASSOCIATED COMPANY
The investment in and advances to Transmedia La Carte Restaurant S.A.
consists of the following:
<TABLE>
<CAPTION>
Total Cost of Share of losses Loan
----- ------- --------------- ----
investment
----------
<S> <C> <C> <C> <C>
Cost of investment $1,500,000 $1,500,000 $ - $ -
Less: Share of license fee (500,000) (500,000) - -
Share of losses to September 30,
1995 (92,455) - (92,455) -
Amounts loaned 30,868 - - 30,868
---------- ---------- --------- --------
Balance September 30, 1995 938,413 1,000,000 (92,455) 30,868
Share of losses for period (300,000) - (300,000) -
Amounts loaned 125,567 - - 125,567
---------- ---------- --------- --------
Balance March 31, 1996 $ 763,980 $1,000,000 $(392,455) $156,435
========== ========== ========= ========
</TABLE>
On April 19, 1996 Transmedia La Carte Restaurant S.A. completed a
rights issue of common stock. The Company declined to subscribe,
accordingly its interest has been reduced to 33%.
8
<PAGE> 11
TRANSMEDIA EUROPE, INC.
Notes to the Condensed Consolidated Financial Statements
3. RELATED PARTY TRANSACTIONS
Amounts due from related parties consist of the following:
<TABLE>
<CAPTION>
September 30, March 31,
1995 1996
<S> <C> <C>
E Guinan III $335,897 $390,739
Conestoga Partners Inc. 113,851 126,373
International Advance Inc 259,837 53,201
-------- --------
$709,585 $570,313
======== ========
</TABLE>
The above loans are unsecured and non interest bearing. Information
regarding the activity with respect to the amounts due from related
parties is as follows:
<TABLE>
<CAPTION>
E Guinan III Conestoga International
------------ --------- -------------
Partners Advance
-------- -------
<S> <C> <C> <C>
Balance at September 30, 1995 $335,897 $113,851 $ 259,837
Additions 146,042 12,522 20,000
Amounts collected (91,200) - (226,636)
-------- -------- ---------
Balance on March 31, 1996 $390,739 $126,373 $ 53,201
======== ======== =========
</TABLE>
Amounts due to related parties consist of the following:
<TABLE>
<CAPTION>
September 30, March 31,
1995 1996
---- ----
<S> <C> <C>
Transmedia Asia Pacific Inc $416,280 $498,729
======== ========
</TABLE>
The above loan is unsecured and non interest bearing and is repayable
on demand. Information regarding the activity with respect to the
amounts due to related parties is as follows:
<TABLE>
<S> <C>
Balance at September 30, 1995 $ 416,280
Additions 250,000
Amounts Charged (167,551)
---------
Balance at March 31, 1996 $ 498,729
=========
</TABLE>
9
<PAGE> 12
ITEM 2
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
GENERAL
The Company was formed in February 1993 and began business operations in October
1993. The Company acquired in May 1993, the rights to exploit, as the exclusive
licensee of Network, the operation of The Restaurant Card throughout the
Licensed Territories. Currently, the Company has operations in the UK and is a
participating shareholder Transmedia La Carte Restaurant S.A., a French company
which began the operation of the Restaurant Card in France in June 1995 and
launched its program in May 1996. The company intends to expand into other
countries through subsidiaries or through the granting of franchises,
sub-licenses or joint ventures.
The Restaurant Card was successfully launched in the UK through a promotion with
the Financial Times in early 1994. Similar promotions have followed with The
Times of London in early 1995 and the Sunday Times in Summer 1995. The financial
results for the year ended September 30, 1994 primarily reflect the start up
costs involved in preparing the Company for the Financial Times promotion and
the initial activity following such promotion. Association with the Financial
Times, The Times of London and the Sunday Times has provided The Restaurant Card
in particular and the Company's business in general with an enhanced profile in
the United Kingdom business community.
The nature of the Company's business is such that there is a lead time before
profitable operations can be anticipated, and is demonstrated in the financial
results for the three month and six month periods ended March 31, 1996 and 1995.
Management believes that this phase has been expedited by The Financial Times
promotion, both in respect of the number of Company Cardholders and the number
of Company Participating Restaurants. The promotion with The Times of London in
January 1995 and the on-going promotion with the Sunday Times has produced
approximately 9,500 Cardholders which was offset by a loss of approximately
4,500 Cardholders gained from earlier promotions. The Company is developing
other promotion programs, some of which may be substantial, to increase the
number of Company Cardholders. These promotions are moving into new areas such
as joint marketing campaigns with high street banks, credit card companies and
department chain stores. Our partners are predominantly large size
organisations, with lengthy internal procedures. Consequently preparing these
campaigns for launch is taking considerably longer than was initially
anticipated. The success of the Company is dependent upon increasing the number
of Company Cardholders and Company Participating Restaurants, as well as
obtaining increased usage of The Restaurant Card by Company Cardholders. As of
March 31, 1996 the Company had approximately 19,000 Company Cardholders and 490
Company Participating Restaurants.
INVESTMENT IN TRANSMEDIA LA CARTE RESTAURANT S.A.
On June 30,1995 the Company announced the establishment of Transmedia La Carte
Restaurant S.A ("Transmedia France"), in which it would be a major shareholder,
to operate the Restaurant Card in France. As of May 1996 Transmedia France had
met all the requirements necessary to operate the Restaurant Card in France
including qualification as a bank under rules promulgated by the Bank of France.
The total share capital of Transmedia France is 25,000,000 Ffr (approximately
$5,000,000) of which the Company has invested 9,000,000 Ffr (approximately
$1,660,000).
The Company granted a sub-license to operate the Restaurant Card in France to
Conestoga Partners Inc for a fee of $1,000,000, which has been paid. The
sub-license has subsequently been transferred to Transmedia France for the same
consideration. The Transmedia License requires the payment of a royalty to
Network in the event that the Company opens in another country, being the
greater of $250,000 or 25% of the initial fee and $250,000 was paid during the
year ended September 30, 1995. Under the terms of the sub-license agreement the
Company will receive, quarterly in arrears, a royalty from Transmedia France of
5% of gross sales of which 2% will be paid to Network.
The shareholders agreement provides for "put" and "call" options. The Company
has a call option to acquire 100% of Transmedia France in the fourth year of
operations at a price based upon a valuation equal to ten times operating cash
flows. The joint venture partners have put options in years 2 and 4. The basis
for valuation under the year 2 option is equal to 120% of capital invested and
under the year 4 option is equal to ten times operating cash flows.
10
<PAGE> 13
ITEM 2
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Since the Restaurant Card business is considered to be a banking activity which
under French law requires a banking license, Transmedia France applied for and
was granted the banking license necessary for its operations. Among the other
shareholders of Transmedia France is the French bank, Societe Generale, which
owns a 10% interest in Transmedia France purchased from existing shareholders.
Management considers the successful grant of the bank license to have been a
significant accomplishment since, in addition to authorising operations in
France, it may establish a precedent throughout the rest of the European Union
making further expansion into other countries easier.
Transmedia France has established offices in Paris with a current staff of 12. A
promotion to launch the Restaurant Card in Paris has been agreed with Les Echos,
France's leading daily financial newspaper. A test launch to 200 cardholders is
being used to evaluate systems, especially the newly developed swipe card
facility, prior to the main launch. The company has recruited approximately 130
restaurants in Paris.
On April 19, 1996 Transmedia France completed a rights issue of common stock.
The Company declined to subscribe, accordingly its interest has been reduced to
33%.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995
For the three months ended March 31, 1995 the company generated revenues of
$944,087 (an increase of 76% over 1994) exclusive of membership fees of $162,319
and other income of $25,000 (other income represents the nonrefundable deposit
received for a 90 day extension on the option to acquire the franchise for
Belgium which has now lapsed). The revenue increase reflects the impact of The
Times of London promotion and the activity of an enlarged cardholder base.
Selling, general and administration expenses for the period were $771,265,
including $62,155 of costs relating to The Times of London promotion. Excluding
the promotion cost, selling, general and administration expenses have decreased
by 3.9%.
Selling, general and administration expenses includes a general provision for
irrecoverable restaurant credits of $56,150 ( 1994 - $nil) against which
restaurant advances of $51,804 have been written-off as a result of restaurant
failures.
THREE MONTHS ENDED MARCH 31, 1996
The Company generated revenues of $726,930 (a decrease of 23% over 1995) for the
three months ended March 31, 1996. Comparison with the three months ended March
31, 1995 should take into account that the The Times promotion gave rise to a
high level of non repeat business. In addition the UK restaurant market has been
adversely affected by particularly poor weather during February. Resumption of
the IRA bombing campaign also impacted badly on London restaurants. The Company
continues to implement a number of card marketing campaigns with large size
joint venture partners, the most recent of which are the Barclays Bank Premier,
Gold and Corporate Card campaigns with a phased launch commencing April 30.
Management is confident that these promotions will generate a significant
increase in revenues in fiscal 1996. Membership fees for the three months ended
March 31, 1996 were $131,415.
Selling, general and administrative expenses, consisting primarily of the costs
of operations, for the three months ended March 31, 1996 amounted to $ 819,328
representing an increase of 6% over 1995, due to increased advertising and
marketing expenditure.
During the three months ended March 31, 1996 Transmedia France incurred start-up
costs of $ 477,520 consisting primarily of the legal and other professional
costs of obtaining the banking license plus the staff costs, rent and other
costs relating to the establishment of the Companys' business in Paris. The
Company's share of losses amounted to $ 238,760.
The Company earned $ 5,743 for the period from the temporary investment of
excess cash funds.
11
<PAGE> 14
ITEM 2
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
No tax benefit has been recognised as the Company remains in a net operating
loss carry forward position for income tax purposes.
SIX MONTHS ENDED MARCH 31, 1995
The Company generated revenues of $1,728,750 in the six months ended March
31,1995 excluding membership fees of $268,443 and other income of $50,000 (other
income represents the non-refundable deposits received for two 90 days options
to acquire the franchise for Belgium, which has now lapsed). The revenues
reflect the activity generated by an existing Cardholder base and new
cardholders obtained from The Times of London promotion. Selling, general and
administration expenses for this period were $1,560,548 and reflect the costs of
operating the business for six months. The Company made a general provision for
irrecoverable restaurant credits of $56,150 (1994 - $nil) against which
restaurant advances of $ 51,804 have been written-off.
SIX MONTHS ENDED MARCH 31, 1996
Revenues for the six months ended March 31, 1996, exclusive of membership fees
of $ 277,432, amounted to $ 1,524,204. Comparison with the six months ended
March 31, 1995 should take into account that the The Times promotion gave rise
to a high level of non repeat business. In addition adverse climatic conditions
in February 1996 and public security concerns impacted badly on the London and
provincial restaurant markets. The revenues were generated by approximately
19,000 Company Cardholders using The Restaurant Card in approximately 490
Company Participating Restaurants.
Selling, general and administrative expenses amounted to $ 1,680,713 for the six
months ended March 31, 1996 representing an increase of 8% over 1995. This
increase is attributable to both additional spending on marketing and
advertising and the costs of adapting software systems for use by Transmedia
France. These modifications are necessary to comply with French legislation.
During the six months ended March 31, 1996 Transmedia France incurred start-up
costs of approximately $ 600,000 consisting primarily of the legal and other
professional costs of obtaining the banking license plus the staff costs, rent
and other costs relating to the establishment of the Companys' business in
Paris. The Company's share of losses amounted to $ 300,000.
The Company earned $ 8,096 in the period from the temporary investment of excess
cash funds.
No tax benefit has been recognised as the Company remains in a net operating
loss carry forward position for income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
The Company was initially capitalised with 6,206,896 shares, (after giving
retroactive effect to stock dividends,) for consideration of $500. On August 11,
1993, the Company issued 3,718,784 shares of common stock of which (i) 225,000
shares were issued to Conestoga, a corporation which is related to the Company
by virtue of the majority shareholding in Conestoga held by Edward J. Guinan
III, the President, Chief Executive Officer, Chief Financial Officer and
Director of the Company, in consideration of costs incurred on behalf of the
Company by Conestoga, with respect to raising capital for the Company; (ii)
496,284 shares were issued to Network, as partial consideration for the purchase
of the license; (iii) 275,000 shares were issued to Conestoga as reimbursement
for a down payment of $275,000 made by Conestoga to Network for the purchase of
the license; and (iv) the remaining 2,722,500 shares were sold to private
investors in a private placement at an offering price of $1 per share. In
addition, the Company issued 85,000 shares of Common Stock as consideration for
services rendered in connection with the raising of capital in the Company's
private placement of shares in August 1993, of the cash proceeds of $2,722,500,
$850,000 was paid to
12
<PAGE> 15
ITEM 2
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Network for further consideration for the purchase of the Transmedia License
from the private placement of shares, leaving a balance, after issue costs, of
$1,744,623 available to the Company for use as working capital in respect of the
utilisation by the Company of its rights under the License Agreement. Initially
available funds have been used for operations of the Company in the United
Kingdom
In February 1994, the Company completed a second private placement of 700,000
shares of Common Stock at a price of $3 per share. The net proceeds of such
private placement are being used as working capital in respect of the
utilisation by the Company of its rights under the License Agreement. In
addition, the Company separately issued 10,000 shares of Common Stock as
consideration for services rendered in connection with the raising of capital in
the second private placement in February 1994.
In July 1995 the Company issued 590,857 shares of 6 1/2 % Convertible Preferred
Stock at a price of $3.50 per share. The net proceeds of $1,964,600 have been
used to finance the Company's investment in France, of $1,660,000, and to
provide working capital to existing operations.
Net cash used in operating activities for the six months ended March 31, 1996
and 1995 were $ 857,863 and $ 612,909 respectively of which $ 216,410 and $
215,254 represents the net cash outflow for advances to Company Participating
Restaurants. These cash outflows were funded by the 1994 issue of common stock
which generated $2,031,097 and the 1995 issue of 6 1/2 % Convertible Preferred
Stock.
The most significant investing activities for the six months ended March 31,
1996 and 1995 were loans to related parties of $ 178,564 and $ 315,094
respectively of which $ 317,836 and $ 96,000 respectively was repaid. A further
$125,567 was invested in Transmedia France in the period.
The Restaurant Credits are generally unsecured and are recoverable only as
Company Cardholders utilise The Restaurant Card at the respective Company
Participating Restaurant. In a small number of cases, the Company may request a
personal guarantee from the owner.
Generally, no other forms of collateral or security are obtained from restaurant
owners. Recovery of Restaurant Credits as well as generation of gross profit
from operations is strongly dependent upon the frequency of use by existing
Company Cardholders of The Restaurant Card. The Company makes provisions for
irrecoverable restaurant credits.
With the exception of the commitments made to the joint venture in France and
those made under the license as disclosed above, the Company has not made any
other significant capital commitment. The Company does not have an immediate
plan to make other significant capital commitments related to the operation of
its business in the United Kingdom.
During fiscal year 1996, based upon projected promotions by the Company, it is
anticipated that additional funds will be required in order to support a higher
level of restaurant advances. The required funds will be obtained by the Company
from one or more sources including equity financings, bank loans or other debt
financings, or the sale of other sub-licenses or franchises. While there can be
no assurance of any such sources of funds or the terms upon which they may be
obtained, the Company is confident that sufficient funds are available to meet
its short term needs and will be available to meet its anticipated business
expansion needs in the remainder of fiscal year 1996. In the immediate term
funds will be obtained from International Advance Inc., a related company. Mr
Edward J Guinan III, the Company's President, is the principal shareholder and
an officer and director of International Advance, Inc.
INFLATION AND SEASONALITY
The Company does not believe that its operations have been materially influenced
by inflation. The business of individual Company Participating Restaurants may
be seasonal depending on their location and the type of food and beverages
served. However, the Company at this time has no basis on which to project
seasonal effects, if any, to its business as a whole.
13
<PAGE> 16
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
PART II: OTHER INFORMATION
Item 1 2, 3, 4 and 5
Item 1, 2, 3, 4 and 5 of Part II are either not applicable or are answered in
the negative and are omitted pursuant to the instructions to Part II.
Exhibit and Reports on Form 8K
a) Exhibits - none
b) Reports on Form 8K - no reports on Form 8K were filed during quarter
ended March 31, 1996.
14
<PAGE> 17
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused their Report to be signed on its behalf by the
undersigned thereunto duly authorised.
TRANSMEDIA EUROPE INC.
/s/E J Guinan
- ---------------
E J GUINAN
President
May 10, 1996
<PAGE> 18
EXHIBIT INDEX
-------------
Exhibit 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,960
<SECURITIES> 0
<RECEIVABLES> 753,364
<ALLOWANCES> 0
<INVENTORY> 1,663,575
<CURRENT-ASSETS> 2,356,934
<PP&E> 175,207
<DEPRECIATION> 80,524
<TOTAL-ASSETS> 4,796,666
<CURRENT-LIABILITIES> 1,621,214
<BONDS> 0
0
5,909
<COMMON> 114
<OTHER-SE> 2,669,429
<TOTAL-LIABILITY-AND-EQUITY> 4,796,666
<SALES> 858,345
<TOTAL-REVENUES> 858,345
<CGS> 484,621
<TOTAL-COSTS> 1,303,949
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (678,621)
<INCOME-TAX> 0
<INCOME-CONTINUING> (445,604)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (712,226)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
