<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 JUNE 30, 1996
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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. 011-44-171-930-0706
------------------------
(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 August 12, 1996: 11,426,680
<PAGE> 2
INDEX
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
PART I: CONDENSED FINANCIAL INFORMATION
ITEM 1 ........................................................... Pages 3-11
Condensed Consolidated Financial Statements
Consolidated Statements of Operations for the three months ended June 30, 1996
(unaudited) and June 30,1995 (unaudited) and the nine months ended June 30, 1996
(unaudited) and June 30, 1995 (unaudited)
Condensed Consolidated Balance Sheets as at:
- - September 30, 1995
- - June 30, 1996 (unaudited)
Consolidated Statements of Cash Flows for the three months ended June 30, 1996
(unaudited) and June 30,1995 (unaudited) and the nine months ended June 30, 1996
(unaudited) and June 30, 1995 (unaudited)
Consolidated Statement of Stockholders Equity for the three month periods ended
December 31, 1995 (unaudited), March 31,1996 (unaudited) and June 30, 1996
(unaudited)
Notes to the Condensed Consolidated Financial Statements
ITEM 2 ........................................................... Pages 12-16
Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II: OTHER INFORMATION ...................................... Page 17
SIGNATURES ....................................................... Page 18
2
<PAGE> 3
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
PART I: CONDENSED CONSOLIDATED FINANCIAL INFORMATION
ITEM 1.
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.
3
<PAGE> 4
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1996 1995 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues $ 847,295 $ 799,210 $ 2,576,045 $ 2,323,414
Membership fees 120,675 145,561 389,118 422,993
Other income 1,902 -- 51,902 --
----------- ----------- ----------- -----------
Total revenues and fees 969,872 944,771 3,017,065 2,746,407
Cost of sales (563,501) (532,807) (1,717,364) (1,548,943)
----------- ----------- ----------- -----------
Gross profit 406,371 411,964 1,299,701 1,197,464
Selling, general and
administrative expenses (650,258) (924,295) (2,210,806) (2,605,008)
----------- ----------- ----------- -----------
Loss from operations (243,887) (512,331) (911,105) (1,407,544)
Share of losses of associated company -- (126,504) -- (426,504)
Interest income 192 -- 15,930 8,096
----------- ----------- ----------- -----------
Loss before income taxes (243,695) (638,835) (895,175) (1,825,952)
Income taxes -- -- -- --
----------- ----------- ----------- -----------
Net loss before preferred share dividends (243,695) (638,835) (895,175) (1,825,952)
Preferred share dividends -- (33,605) -- (100,815)
----------- ----------- ----------- -----------
Net loss after preferred share dividends $ (243,695) $ (672,440) $ (895,175) $(1,926,767)
=========== =========== =========== ===========
Loss per common and
common equivalent share $ (0.02) $ (0.06) $ (0.08) $ (0.17)
Weighted average number of
common and common equivalent shares outstanding 11,422,680 11,426,680 11,422,680 11,426,680
=========== =========== =========== ===========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE> 5
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30,
SEPTEMBER 30, 1996
1995 (UNAUDITED)
------------- -----------
<S> <C> <C>
Assets
CURRENT ASSETS
Cash (including cash investment
of $nil at June 30, 1996 and
$730, 767 as September 30, 1995) $ 796,911 $ 27
Trade accounts receivable 131,555 117,086
Restaurant credits, (net of allowance for irrevocable
credits of $184,791 at June 30, 1996 and of $127,557
at September 30, 1995) 1,392,571 1,185,156
Lease deposits 66,400 64,118
Amounts due from related parties (note 3) 709,585 --
Other current assets 47,240 103,727
---------- ----------
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Restaurant credits (net allowance for irrevocable credits of
$230,000 at June 30, 1996 and September 30, 1995)
(note 1c) 230,000 230,000
Investment in and advance to associated company 938,413 637,476
Property and equipment (net of accumulated depreciation of $92,528 at
June 30, 1996 and $64,366 at September 30, 1995) 103,893 86,394
Intangible assets (net of accumulated amortisation of $297,232 at
June 30, 1996 and $216,172 at September 30, 1995) 1,405,112 1,324,052
---------- ----------
TOTAL ASSETS $5,821,680 $3,748,036
========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5
<PAGE> 6
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30,
SEPTEMBER 30, 1996
1995 (UNAUDITED)
------------- -----------
<S> <C> <C>
Liabilities and Stockholders' Equity
CURRENT LIABILITIES
Bank overdraft $ 109,422 $ 62,647
Trade accounts payable 322,901 222,762
Deferred membership fee income 356,814 129,210
Accrued liabilities 303,203 617,519
Amount due to related party 416,280 624,651
----------- -----------
TOTAL CURRENT LIABILITIES 1,508,620 1,656,789
NON-CURRENT LIABILITIES
Deferred license fee income 500,000 500,000
----------- -----------
Total liabilities 2,008,620 2,156,789
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $.00001 par value per share
Authorized 20,000,000 shares; 11,426,680 issued and outstanding at
June 30, 1996 and September 30, 1995 114 114
6 1/2% Convertible Preferred Shares, $0.01 par value per share
Authorized 5,000,000 shares; 590,857 issued and outstanding shares at
June 30, 1996 and September 30, 1995 5,909 5,909
Additional paid in capital 8,412,081 8,412,081
Treasury Stock -- (517,112)
Unearned compensation-restriction stock (402,000) (159,000)
Accumulated deficit (4,213,404) (6,140,171)
Cumulative foreign currency translation adjustment 10,360 (10,574)
----------- -----------
Total stockholders' equity $ 3,813,060 $ 1,591,247
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,821,680 $ 3,748,036
=========== ===========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
6
<PAGE> 7
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from Operating Activities:
-Net loss before preferred dividends $(243,695) $(638,835) $ (895,175) $(1,825,952)
Adjustment to reconcile net loss to net cash used
in operating activities
-Depreciation 16,937 11,021 33,752 32,034
-Amortisation of license 27,021 27,021 81,064 81,060
-Provision for irrecoverable restaurant credits 26,269 23,925 81,569 69,525
-Deferred membership fees (118,642) (97,709) (242,724) (207,979)
-Amortisation of deferred compensation 81,000 81,000 243,000 243,000
-Share of losses of associated company -- 126,504 -- 426,504
Changes in assets and liabilities:
-Trade accounts payable 12,160 (21,762) 95,384 (82,380)
-Accrued liabilities (86,027) 20,984 (63,781) 270,300
-Restaurant credits (282,804) 265,059 (499,080) 48,649
-Trade accounts receivable (27,260) 69,253 (49,929) 7,233
-Other current assets (65,075) 228 (56,381) (56,487)
-Lease deposits (16,000) (1,037) (16,724) 2,282
--------- --------- ----------- -----------
Net cash used in operating activities (676,116) (134,348) (1,289,025) (992,211)
--------- --------- ----------- -----------
Cash flows from investing activities:
-Loans and repayments to related parties (40,012) (136,657) (355,106) (315,221)
-Repayment by related parties of loans (51,403) 154,619 44,597 472,455
-Loans from related parties 510,000 290,900 660,000 540,900
-Charges to related parties -- (129,739) -- (297,290)
-Payment of preferred share dividends -- (26,124) -- (40,122)
-Loan to associated company -- -- -- (125,567)
-Purchase of property and equipment (10,209) (139) (10,209) (20,249)
--------- --------- ----------- -----------
Net cash from investing activities 408,376 152,860 339,282 214,906
--------- --------- ----------- -----------
Cash flows from financing activities: (402,000) (159,000)
-Bank overdraft (3,344) (26,650) 69,683 (40,757)
-Proceeds from stock options exercised 6,000 -- 6,000 --
--------- --------- ----------- -----------
Net cash used in financing activities 2,656 (26,650) 75,683 (40,757)
--------- --------- ----------- -----------
Effect of foreign currency on cash: (28,438) 5,205 (1,313) 21,178
Net (decrease)/increase in cash and cash
equivalents (293,522) (2,933) (875,373) 796,884
--------- --------- ----------- -----------
Cash and cash equivalents at beginning of
period 310,584 2,960 892,435 796,911
--------- --------- ----------- -----------
Cash and cash equivalents at end of period $ 17,062 $ 27 $ 17,062 $ 27
========= ========= =========== ===========
</TABLE>
Supplemental disclosures of cash flow information:
No amounts of cash were paid for interest or income taxes for each of the
periods presented.
See accompanying notes to the financial statements.
7
<PAGE> 8
TRANSMEDIA EUROPE INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER NUMBER OF ADDITIONAL
OF COMMON COMMON PREFERRED PREFERRED PAID-IN
SHARES STOCK SHARES STOCK 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
Net loss after
preferred share
dividends -- -- -- -- --
Effect of foreign
currency translation -- -- -- -- --
Compensation
expense-restricted
stock -- -- -- -- --
Treasury Stock -- -- -- -- --
Balance June 30,
1996 11,426,680 $114 590,857 $5,909 $8,412,081
========== ==== ======= ====== ==========
<CAPTION>
CUMULATIVE UNEARNED
FOREIGN COMPEN-
CURRENCY SATION
TREASURY TRANSLATION RESTRICTED ACCUMULATED
STOCK ADJUSTMENT STOCK DEFICIT TOTAL
----- ---------- ----- ------- -----
<S> <C> <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
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
Net loss after
preferred share
dividends -- -- -- (672,440) $(672,440)
Effect of foreign
currency translation -- 24,347 -- -- 24,347
Compensation
expense-restricted
stock -- -- 81,000 -- 81,000
Treasury Stock (517,112) -- -- -- (517,112)
Balance June 30,
1996 -- $(10,574) $(159,000) $(6,140,171) $1,591,247
======== ======== ========= =========== ==========
</TABLE>
See accompanying notes to the condensed financial statements.
8
<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.
(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 ("Restaurant Credits")
to restaurants for food and beverage credits from certain participating
restaurants, ("Company Participating Restaurants") which are then recovered
as the Company's cardholders (Company Cardholders") utilize their
restaurant charge card ("the Restaurant Card") (see note 1(c)). Presently,
the Company operates in the United Kingdom and has an associate company
operating in France.
The Company has been granted a license, (the "Transmedia License"), to
operate a specialized restaurant charge card business in Europe, Turkey and
the countries of the former U.S.S.R. ("the Licensed Territories") 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 and Director of the Company (see note
3).
As of June 30, 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 33
</TABLE>
(c) Restaurant Credits
Restaurant credits represent the total advances made to Company
Participating Restaurants in exchange for credits less the amount by which
these credits are recouped by the Company as a result of Company
Cardholders utilizing the Restaurant Card at Company 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 Company Participating Restaurants that have
ceased operations or whose credits may not be utilized by Company
Cardholders.
The amount of funds advanced to Company Participating Restaurants are
generally unsecured and are recoverable as Company Cardholders utilize the
Restaurant Card at the respective Company Participating 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 Company Participating
Restaurant. Generally, no other forms of collateral or security are
obtained from the restaurant
9
<PAGE> 10
owners.
(d) Membership Fees
Membership fees collected are deferred and are recognized as revenue in
equal monthly installments.
(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 June 30, 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>
COST OF
TOTAL INVESTMENT SHARE OF LOSSES LOAN
----- ---------- --------------- ----
<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 (426,504) -- (426,504) --
Amounts loaned 125,567 -- -- 125,567
---------- ---------- --------- --------
Balance June 30, 1996 $ 637,476 $1,000,000 $(518,959) $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%.
3. RELATED PARTY TRANSACTIONS
Amounts due from related parties consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30 JUNE 30
1995 1996
------------ --------
<S> <C> <C>
E. Guinan III $335,897 $ --
Conestoga Partners Inc. 113,851 --
International Advance Inc. 259,837 --
-------- --------
$709,585 $ --
======== ========
</TABLE>
10
<PAGE> 11
The above loans are unsecured and non interest bearing. Information
regarding the activity with respect to the amounts due to related parties is as
follows:
<TABLE>
<CAPTION>
CONESTOGA INTERNATIONAL
E. GUINAN III PARTNERS ADVANCE
------------- -------- -------
<S> <C> <C> <C>
Balance at September 30, 1995 $ 335,897 $113,851 $ 259,837
Additions 192,392 12,522 20,000
Amounts charged -- -- 55,068
Amounts collected (137,550) -- (334,905)
Treasury Stock (390,739) (126,373) --
--------- -------- ---------
Balance on June 30, 1996 $ -- $ -- $ --
========= ======== =========
</TABLE>
Amounts due to related parties consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30 JUNE 30
1995 1996
------------ --------
<S> <C> <C>
Transmedia Asia Pacific, Inc. $416,280 $390,739
International Advance Inc. -- 290,900
-------- --------
$416,280 $681,639
======== ========
</TABLE>
The above loans are unsecured and non interest bearing are repayable on
demand. Information regarding the activity with respect to the amounts due to
related parties is as follows:
<TABLE>
<CAPTION>
TRANSMEDIA ASIA INTERNATIONAL
PACIFIC, INC. ADVANCE
---------------- -------------
<S> <C> <C>
Balance at September 30, 1995 $ 416,280 $ --
Loans 250,000 290,900
Amounts charged (242,222) --
Amounts repaid (90,307) --
--------- --------
Balance on June 30, 1996 $ 333,751 $290,900
========= ========
</TABLE>
11
<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 of 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 in Europe 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, the Sunday Times in Summer 1995 and Barclays Bank
Premier in May 1996. 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 and Barclays Bank 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, as is demonstrated in the financial
results for the three month and nine month periods ended June 30, 1996 and 1995.
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 Company Cardholders gained
from earlier promotions. The first phase of the Barclays Bank campaign has
produced approximately 2,500 Company Cardholders. 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
organizations, 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
June 30, 1996 the Company had approximately 22,500 Company Cardholders and 480
Company Participating Restaurants.
Certain statements in this Report under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, including, without limitation,
statements regarding future cash requirements. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions; industry capacity; industry trends; demographic changes;
competition; the loss of a significant amount of Company Cardholders or Company
Participating Restaurants; changes in business strategy or development plans;
quality of management; availability, terms and deployment of capital; business
abilities and judgment of personnel; availability of qualified personnel;
changes in, or the failure comply with, government regulations; and other
factors referenced in this Report.
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
12
<PAGE> 13
ITEM 2 TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
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.
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 authorizing 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 400 cardholders is
being used to evaluate systems, especially the newly developed swipe card
facility, prior to the main launch. Transmedia France has recruited
approximately 155 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 JUNE 30, 1995
For the three months ended June 30, 1995 the Company generated revenues of
$847,295 (an increase of 8% over 1994) exclusive of membership fees of $120,675
and other income of $1,902. The revenue increase reflects the impact of The
Times and Sunday Times promotions however this is diluted as a result of dining
incentives which accelerated the usage in the quarter ended March 31, 1995. The
Company Cardholder numbers decreased in the quarter by approximately 2,000 of
which more than 76% had never used their Restaurant Card. Selling, general and
administrative expenses for the period were $650,258.
THREE MONTHS ENDED JUNE 30, 1996
The Company generated revenues of $799,210 (a decrease of 6% over 1995) for the
three months ended June 30, 1996. Movement in exchange rates accounts for this
decrease, because the revenues and expenditures of the UK operating subsidiary
are transacted in UK sterling. The phased launch commencing April 30 with
Barclays Bank Premier, has produced approximately 2,500 Company Cardholders from
a population of under 75,000 Barclays Bank Premier cardholders, to give a
penetration rate in excess of 3%. Management believe this illustrates the
13
<PAGE> 14
ITEM 2
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
benefit of endorsement by a leading international bank. Following on from this
success there are plans to repeat the campaign and extend it to other, far
larger, sectors of the Barclays Bank customer base. In addition a trial 20%
savings-no membership fee Transmedia Card has been launched with MBNA during
July 1996. Approximately 250,000 MBNA cardholders are being mailed in August
1996. Management is confident that these promotions will generate a significant
increase in revenues in fiscal 1996. Membership fees for the three months ended
June 30, 1996 were $145,561.
Selling, general and administrative expenses, consisting primarily of the costs
of operations, for the three months ended June 30, 1996 amounted to $924,295 an
increase of 42% over the three months ending June 30, 1995, but conversely this
represents a 42% decrease over the three months ending September 30, 1995. In
the period there has been additional expenditure on advertising, printing and
marketing in addition to a re-appraisal of Company Cardholder debts. In June
1996 the Company undertook a cost evaluation exercise resulting in savings in
printing and staff costs.
During the three months ended June 30, 1996 Transmedia France incurred losses of
$329,659 after generating revenues of $75,000. Selling, general and
administrative costs amounted to $354,576 consisting of the staff costs, rent
and other costs relating to the establishment of the Companys' business in Paris
in addition to the legal and other professional costs of obtaining the banking
license. The Company's share of losses amounted to $126,504.
No tax benefit has been recognized as the Company remains in a net operating
loss carry forward position for income tax purposes.
NINE MONTHS ENDED MARCH 31, 1995
The Company generated revenues of $2,576,045 in the nine months ended June 30,
1995, excluding membership fees of $389,118, and other income of $51,902 (other
income represents the non-refundable deposits received for two 90 day 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 and Sunday Times promotions. Selling, general
and administration expenses for this period were $2,210,806 and reflect the
costs of operating the business for nine months. The Company made a general
provision for irrecoverable restaurant credits of $81,569 (1994 - $23,516)
against which restaurant advances of $66,662 have been written-off.
NINE MONTHS ENDED MARCH 31, 1996
Revenues for the nine months ended June 30, 1996, exclusive of membership fees
of $422,993, amounted to $2,323,414. Comparison with the nine months ended June
30, 1995 should in part take into account that the The Times promotion gave rise
to a high level of non repeat business. In addition foreign exchange rates have
had an adverse effect, because the revenues and expenditures of the UK operating
subsidiary are transacted in UK sterling. The revenues were generated by
approximately 20,000 Company Cardholders using The Restaurant Card in
approximately 480 Company Participating Restaurants.
Selling, general and administrative expenses amounted to $ 2,605,008 for the
nine months ended June 30, 1996 representing an increase of 18% over 1995. This
increase is attributable to additional spending on marketing and advertising. In
June 1996 the Company undertook a cost evaluation exercise resulting in savings
in printing and staff costs.
During the nine months ended March 31, 1996 Transmedia France incurred losses of
$950,869 after revenues of $75,000. The Company's share of losses amounted to
$426,504.
The Company earned $8,096 in the period from the temporary investment of excess
cash funds.
No tax benefit has been recognized as the Company remains in a net operating
loss carry forward position for
14
<PAGE> 15
ITEM 2 TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
The Company was initially capitalised with 6,206,896 shares of common stock,
(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 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 utilization 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
utilization 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.
In August 1996 the Company completed a private placement of 892,857 shares of
Common Stock at a price of $1.40 per share. The proceeds of $1,250,000 are to be
used for working capital and repayment of related party loans.
Net cash used in operating activities for the nine months ended June 30, 1996
and 1995 were $992,211 and $1,289,025 respectively of which $48,649 and
$(499,080) represents the net cash inflow/(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 nine months ended June 30,
1996 and 1995 were loans from related parties of $540,900 and $660,000
respectively of which $472,455 and $44,567 respectively was repaid. A further
$125,567 was invested in Transmedia France in the period.
During the three months ended June 30, 1996 the Company purchased 148,853 and
48,142 shares of Common Stock from E Guinan III and Conestoga Partners Inc. at
$2.625 per share, as repayment of their outstanding loans.
The advances ("Restaurant Credits") are generally unsecured and are recoverable
only as Company Cardholders utilize 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
15
<PAGE> 16
ITEM 2 TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
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 and 1997, based upon projected promotions by the
Company, it is anticipated that additional funds will be required. 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.
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.
16
<PAGE> 17
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
PART II: OTHER INFORMATION
Item 1, 2, 3, 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.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders of the Company was held on
April 25, 1996.
(b) The following six directors were elected at the Annual Meeting.
Each director received 6,612,216 votes For election and 10,000
votes Against election.
Eugene A. Cernan
Walter M Epstein
Edward J. Guinan, III
Helene Ploix
Joseph V. Vittoria
(c) Listed below are the matters which were voted on at the Annual
Meeting and the votes for each such matter:
1. To amend the Company's Certificate of Incorporation to increase the
Company's authorized capital stock from 25,000,0000 to 100,000,000.
For: 6,606,989
Against: 35,000
Abstain: 1,000
2. To approve and ratify the Company's 1996 Outside Directors Stock
Option Plan.
For: 6,606,989
Against: 39,700
Abstain: 1,000
3. To ratify the selection of KPMG as the Company's independent public
accountants for fiscal 1996.
For: 6,606,989
Against: 0
Abstain: 1,000
Exhibit and Reports on Form 8K
a) Exhibits - none
b) Reports on Form 8K - no reports on Form 8K were filed during quarter ended
June 30, 1996.
17
<PAGE> 18
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSMEDIA EUROPE INC.
E J GUINAN
President
August 12, 1996
18
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