<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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, 1997
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.)
1 HURLINGHAM BUSINESS PARK, SULLIVAN ROAD, LONDON SW6 3DU, ENGLAND
------------------------------------------------------------------
(Address of principal executive offices) (zip code)
U.K. 011-44-171-610-6776
-------------------------------
(Registrant's telephone number,
including area code)
11 ST. JAMES'S SQUARE, LONDON SW1Y 4LB, ENGLAND
-----------------------------------------------
(Former Address of principal executive offices)
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 15, 1997: 13,878,792
<PAGE> 2
INDEX
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
<TABLE>
<S> <C>
PART I : CONDENSED CONSOLIDATED FINANCIAL INFORMATION
ITEM 1 .................................................................................. Pages 1-9
Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Operations for the three months ended and
the nine months ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited)
Condensed Consolidated Balance Sheets as of:
- - September 30, 1996
- - June 30, 1997 (unaudited)
Condensed Consolidated Statements of Cash Flows for the three months ended and
the nine months ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited)
Condensed Consolidated Statement of Changes in Stockholders' Equity for the nine
month period ended June 30, 1997 and for the fiscal years ended September 30,
1995 and 1996.
Notes to the Condensed Consolidated Financial Statements
ITEM 2 .................................................................................. Pages 10-14
Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II: OTHER INFORMATION ............................................................. Page 15
SIGNATURES .............................................................................. Page 16
</TABLE>
<PAGE> 3
PART 1: FINANCIAL INFORMATION
ITEM 1
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
June 30, June 30, June 30, June 30,
1996 1997 1996 1997
(unaudited) (unaudited) (unaudited) (unaudited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 799,210 $ 761,024 $ 2,323,414 $ 2,513,071
Membership fees 145,561 123,000 422,993 368,250
------------ ------------ ------------ ------------
Total revenues and fees 944,771 884,024 2,746,407 2,881,321
Cost of sales (532,807) (503,864) (1,548,943) (1,673,521)
------------ ------------ ------------ ------------
Gross profit 411,964 380,160 1,197,464 1,207,800
Selling, general and
administrative expenses (924,295) (925,643) (2,605,008) (3,007,749)
------------ ------------ ------------ ------------
Loss from operations (512,331) (545,483) (1,407,544) (1,799,949)
Share of losses of affiliated companies (126,504) (332,621) (426,504) (644,258)
Interest income -- 1,235 8,096 6,236
Interest expense -- (37,581) -- (37,581)
------------ ------------ ------------ ------------
Loss before income taxes (638,835) (914,450) (1,825,952) (2,475,552)
Income taxes -- -- -- --
------------ ------------ ------------ ------------
Net loss before preferred share dividends (638,835) (914,450) (1,825,952) (2,475,552)
Preferred share dividends (33,605) (33,605) (100,815) (100,815)
------------ ------------ ------------ ------------
Net loss after preferred share dividends $ (672,440) $ (948,055) $ (1,926,767) $ (2,576,367)
============ ============ ============ ============
Loss per common share $ (0.06) $ (0.07) $ (0.17) $ (0.20)
Weighted average number of
common shares outstanding 11,426,680 13,878,792 11,422,680 13,065,605
============ ============ ============ ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
1
<PAGE> 4
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
September 30, June 30,
1996 1997
(unaudited)
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents (including temporary
cash investments of $nil at June 30, 1996 and
$730,767 at September 30, 1995) $ 61,661 $ 41,400
Trade accounts receivable 105,167 36,095
Restaurant credits, (net of allowance for irrecoverable
credits of $399,328 at September 30, 1996 and of
$499,626 at June 30, 1997) 1,309,279 1,282,771
Amounts due from related parties (note 3) 114,246 104,203
Prepaid expenses and other current assets 264,478 240,329
---------- ----------
TOTAL CURRENT ASSETS 1,854,831 1,704,798
NON-CURRENT ASSETS
Investment in affiliated companies (note 2) 698,141 2,808,156
Property and equipment (net of accumulated
depreciation of $104,262 at September 30, 1996
and $145,544 at June 30, 1997) 76,357 46,397
Intangible assets (net of accumulated
amortization of $324,248 at September 30, 1996
and $405,321 at June 30, 1997) 1,297,026 1,215,963
Other asset (note 4) -- 142,946
---------- ----------
TOTAL ASSETS $3,926,355 $5,918,260
========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
2
<PAGE> 5
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
September 30, June 30,
1996 1997
(unaudited)
----------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable 483,229 949,657
Deferred membership fee income 352,542 285,511
Accrued liabilities 438,395 754,479
Amount due to related parties (note 3) -- 1,677,103
----------- ------------
TOTAL CURRENT LIABILITIES 1,274,166 3,666,750
NON-CURRENT LIABILITIES
Deferred license fee income 500,000 425,894
----------- ------------
TOTAL LIABILITIES 1,774,166 4,092,644
----------- ------------
STOCKHOLDERS' EQUITY
6 1/2 % Convertible preferred shares, $0.01 par value, 5,000,000 shares
authorised, 590,857 issued and outstanding shares at
September 30, 1996 and June 30, 1997 5,909 5,909
Common stock, $.00001 par value, 95,000,000 shares authorised, 12,319,537
issued and outstanding at September 30, 1996
and 13,878,792 at June 30, 1997 123 140
Additional paid in capital 9,647,072 11,943,055
Treasury Stock (517,112) (517,112)
Unearned compensation -restricted stock (78,000) --
Accumulated deficit (6,908,928) (9,485,295)
Cumulative foreign currency translation
adjustment 3,125 (121,081)
----------- ------------
TOTAL STOCKHOLDERS' EQUITY $ 2,152,189 $ 1,825,616
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,926,355 $ 5,918,260
=========== ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE> 6
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
June 30, June 30, June 30, June 30,
1996 1997 1996 1997
(unaudited) (unaudited) (unaudited) (unaudited)
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
- Net loss before preferred dividends $(638,835) $ (914,448) $(1,825,952) $(2,475,552)
Adjustment to reconcile net loss
to net cash used in operating activities
- Depreciation 11,021 11,393 32,034 34,111
- Amortization of intangible assets 27,021 27,021 81,060 81,063
- Provision for irrecoverable restaurant credits 23,925 30,620 69,525 100,298
- Amortisation of deferred compensation 81,000 -- 243,000 78,000
- Share of losses of affiliated companies 126,504 332,621 426,504 644,258
- Amortization of goodwill -- 66,693 -- 66,693
Changes in assets and liabilities:
- Trade accounts payable (21,762) 163,388 (82,380) 418,105
- Accrued liabilities 20,984 79,055 270,300 249,955
- Restaurant credits 265,059 48,321 48,649 57,137
- Trade accounts receivable 69,253 1,668 7,233 79,589
- Other current assets (809) (10,574) (54,205) 36,605
- Deferred membership fees (97,709) (11,929) (207,979) (102,285)
--------- ----------- ----------- -----------
Net cash used in operating activities (134,348) (176,171) (992,211) (732,023)
--------- ----------- ----------- -----------
Cash flows from investing activities:
- Due from related parties 179,123 28,559 275,277 346,856
- Purchase of property and equipment (139) -- (20,249) --
- Net investment in affiliated company -- -- -- (315,000)
- Purchase of NHS option -- -- -- (142,946)
- Purchase of Countdown -- (945,650) -- (1,209,656)
--------- ----------- ----------- -----------
Net cash (used in)/provided by investing activities 178,984 (917,091) 255,028 (1,320,746)
--------- ----------- ----------- -----------
Cash flows from financing activities:
- Net proceeds received from issuance of
common stock -- -- -- 1,097,500
- Payment of preferred share dividends (26,124) -- (40,122) (78,526)
- Bank overdraft (26,650) -- (40,757) --
- Loan from related party -- 1,000,000 -- 1,000,000
--------- ----------- ----------- -----------
Net cash (used in)/ provided by financing activities (52,774) 1,000,000 (80,879) 2,018,974
--------- ----------- ----------- -----------
Effect of foreign currency on cash 5,205 (6,807) 21,178 13,534
Net (decrease)/increase in cash and
cash equivalents (2,933) (100,069) 796,884 (20,261)
--------- ----------- ----------- -----------
Cash and cash equivalents at
beginning of period 2,960 141,469 796,911 61,661
--------- ----------- ----------- -----------
Cash and cash equivalents $ 27 $ 41,400 $ 27 $ 41,400
at end of period
========= =========== =========== ===========
</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 condensed consolidated financial statements
4
<PAGE> 7
TRANSMEDIA EUROPE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Number of Common Number of Preferred Additional Treasury
Common shares Stock Preferred stock paid-in stock
shares capital
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1994 11,420,680 $114 -- $ -- $ 6,447,390 --
Issuance of common stock
due to exercise of options 6,000 -- -- -- 6,000 --
Issuance of convertible
preferred stock -- -- 590,857 5,909 2,062,091 --
Issue costs -- -- -- -- (103,400) --
Net loss after preferred
share dividends -- -- -- -- -- --
Effect of foreign currency
translation -- -- -- -- -- --
Compensation expense -
restricted stock -- -- -- -- -- --
---------- ---- ------- ------ ----------- ---------
Balance, September 30, 1995 11,426,680 $114 590,857 $5,909 $ 8,412,081 --
Issuance of common stock 892,857 9 -- -- 1,249,991 --
Issue costs -- -- -- -- (15,000) --
Net loss after preferred
share dividends -- -- -- -- -- --
Effect of foreign currency
translation -- -- -- -- -- --
Compensation expense -
restricted stock -- -- -- -- -- --
Treasury stock -- -- -- -- -- (517,112)
---------- ---- ------- ------ ----------- ---------
Balance, September 30, 1996 12,319,537 $123 590,857 $5,909 $ 9,647,072 $(517,112)
Issuance of common stock 556,250 17 -- -- 2,310,983 --
Issue costs -- -- -- -- (15,000) --
Net loss after preferred
share dividends -- -- -- -- -- --
Effect of foreign currency
translation -- -- -- -- -- --
Compensation expense -
restricted stock -- -- -- -- -- --
---------- ---- ------- ------ ----------- ---------
Balance, June 30, 1997 12,875,787 $140 590,857 $5,909 $11,943,055 $(517,112)
========== ==== ======= ====== =========== =========
</TABLE>
<TABLE>
<CAPTION>
Cumulative Unearned Accumulated Total
foreign compensation deficit
currency restricted
adjustment stock
<S> <C> <C> <C> <C>
Balance, September 30, 1994 $ 8,060 $(726,000) $(1,997,952) $ 3,731,612
Issuance of common stock
due to exercise of options -- -- -- 6,000
Issuance of convertible
preferred stock -- -- -- 2,068,000
Issue costs -- -- -- (103,400)
Net loss after preferred
share dividends -- -- (2,215,452) (2,215,452)
Effect of foreign currency
translation 2,300 -- -- 2,300
Compensation expense -
restricted stock -- 324,000 -- 324,000
--------- --------- ----------- -----------
Balance, September 30, 1995 $ 10,360 $(402,000) $(4,213,404) $ 3,813,060
Issuance of common stock -- -- -- 1,250,000
Issue costs -- -- -- (15,000)
Net loss after preferred
share dividends -- -- (2,695,524) (2,695,524)
Effect of foreign currency
translation (7,235) -- -- (7,235)
Compensation expense -
restricted stock -- 324,000 -- 324,000
Treasury stock -- -- -- (517,112)
--------- --------- ----------- -----------
Balance, September 30, 1996 $ 3,125 $ (78,000) $(6,908,928) $ 2,152,189
Issuance of common stock -- -- -- 2,311,000
Issue costs -- -- -- (15,000)
Net loss after preferred
share dividends -- -- (2,576,367) (2,576,367)
Effect of foreign currency
translation (124,206) -- -- (124,206)
Compensation expense -
restricted stock -- 78,000 -- 78,000
--------- --------- ----------- -----------
Balance, June 30, 1997 $(121,081) $ -- $(9,485,295) $ 1,825,616
========= ========= =========== ===========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5
<PAGE> 8
TRANSMEDIA EUROPE, INC. AND SUBSIDIARIES
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, 1996 was derived
from the Company's audited financial statements. 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, 1996
Form 10-K filing. 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 the three months ended and nine months ended
June 30, 1997 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 to restaurants for food and beverage credits from certain
participating restaurants, which are then recovered as the Company's
cardholders utilize their restaurant charge card (see note 1(e)).
Presently, the Company's operations are in the United Kingdom and there
is an affiliate company operating 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 other countries outside of Europe that were formerly part of
the Union of Soviet Socialist Republics (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, currently Chairman of the Board of Directors of the Company
(see note 3).
The Company intends to expand operations in other portions of the
licensed territories through wholly-owned subsidiaries, unaffiliated
sublicensees and franchisees or through joint ventures. On April 3,
1997, the Company purchased 50% of the outstanding capital stock of
Countdown Holdings Limited, a privately owned United Kingdom company
based in London, England ("Countdown"). The balance of the outstanding
capital stock of Countdown was simultaneously purchased by Transmedia
Asia Pacific, Inc. on similar terms to the terms of the Company's
purchase. The Company's element of the consideration consisted of
$820,650 (500,000 pounds sterling) in cash and the issuance of
1,200,000 shares of Common Stock in the Company. In addition, the
Company granted an option to purchase up to 250,000 shares of Common
Stock at a purchase price of $1.00 per share to the owner of Countdown.
The cash portion of the purchase price was funded by a $1,000,000 loan
from a director and stockholder of the Company. The loan matures on
September 27, 1997, bears interest at the rate of 12% per annum and is
collateralized by a pledge of all the Countdown shares purchased by the
Company. In connection with the loan, the Company issued the director
and stockholder five-year warrants to purchase up to 125,000 shares of
Common Stock at $1.25 per share.
As of June 30, 1997, 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
('Transmedia France') France 50
Countdown Holdings Limited United Kingdom 50
</TABLE>
(c) 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, 1996 or at June 30, 1997.
6
<PAGE> 9
TRANSMEDIA EUROPE, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(d) Revenue Recognition
Revenues represent the retail value of food and beverages acquired from
the participating restaurants by the Company's cardholders, reduced by
the 20% or 25% discount offered to cardholders. Revenues from card
membership fees are time apportioned over the period to which they
relate.
(e) Restaurant Credits
Restaurant credits represent the total advances made to participating
restaurants less the amount by which these credits are recouped by the
Company as a result of Company cardholders utilizing their cards at
participating restaurants. The amounts 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 utilized by
cardholders.
The funds advanced to participating restaurants are generally unsecured
and are recoverable as cardholders utilize 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 to 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.
2. INVESTMENT IN AFFILIATED COMPANIES
The investment in affiliated companies consists of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1996 1997
(unaudited)
----------- -----------
<S> <C> <C>
Transmedia France
Cost of investment $ 1,800,000 $ 3,067,726
Less: Share of license fee (466,667) (431,667)
Less: Unpaid element -- (862,436)
----------- -----------
1,333,333 1,773,623
Share of losses (635,192) (1,288,699)
Amortization of goodwill -- (20,927)
Foreign currency movement -- (230,024)
----------- -----------
698,141 233,973
Countdown Holdings Limited
Cost of investment -- 2,658,156
Share of losses -- (38,207)
Amortization of goodwill -- (45,766)
----------- -----------
$ 698,141 $ 2,808,156
=========== ===========
</TABLE>
Due to the provision of "put" and "call" options in the shareholders
agreement which establish a basis under which Transmedia France may
become a wholly owned subsidiary, $500,000 of the $1,000,000
sub-license fee paid to the Company by Transmedia France in 1995 has
not been recognised but instead has been deferred until such time as
these options are exercised or expire. The remaining balance of
$500,000 has also been deferred against the investment in Transmedia
France and is being amortised over a 15 year period commencing October
1995. 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. On April 19, 1996
Transmedia France completed a rights issue of shares. Whilst the
Company declined to subscribe, it did acquire 15,000 shares, in an
unrelated transaction, from International Advance, Inc., a company of
which Edward J Guinan III, Chairman of the Board of Directors of the
Company, is the principal shareholder and an officer and director, in
exchange for $300,000 and certain rights to jointly develop systems
unrelated to the business of Transmedia France. Accordingly, the
Company's interest was reduced to 36%. On January 17, 1997 the Company
acquired 5,300 shares from other shareholders in Transmedia France and
in addition subscribed for 67,500 partly paid shares, increasing the
Company's interest to 50%. In January 1997 the Bank of France granted
Transmedia France an unconditional banking license, replacing its
previous provisional license. The Company has committed to acquiring a
further 32,200 shares from other shareholders, which would increase the
Company's interest to 60%. The completion of these transactions is
pending due to subsequent European Economic Union questions that have
been raised through the Bank of France.
7
<PAGE> 10
TRANSMEDIA EUROPE, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. INVESTMENT IN AFFILIATED COMPANIES (CONTINUED)
In December 1996 the Company reached an agreement with Transmedia
France under which it will grant sub-licenses for Belgium/Luxembourg,
Spain, Italy and French speaking Switzerland for 9,250,000Ffr
(approximately $1,780,000). Network has agreed to defer the 25%
royalties due upon the completion of the agreement ($800,000 in
aggregate) with payment to be made of $250,000 as each country area is
opened, except for $50,000 for French speaking Switzerland. Under
certain circumstances the payment schedule can be accelerated.
Acquisition of the incremental piece of Transmedia France on January
17, 1997 has been accounted for using the purchase accounting method.
The cost of acquisition was calculated as $1,340,000 giving rise to
goodwill of $610,760, in addition to the existing $51,157 goodwill.
Goodwill is amortised over a 15 year period. The share of net losses
relating to the incremental piece have been included from January 17,
1997.
On March 27, 1997 International Advance, Inc., a company of which
Edward J Guinan III, Chairman of the Company, is the principal
shareholder and an officer and a director , assigned the Countdown
option agreement at cost to the Company and Transmedia Asia Pacific,
Inc. for a consideration of approximately $205,000 (125,000 sterling)
each and related legal costs of $59,006 each. On April 3, 1997, the
Company purchased from Mr C.E.C. Radbone approximately 50% of the
outstanding capital stock of Countdown. Countdown, through its
wholly-owned operating subsidiary, Countdown Plc, is an international
provider of membership discount services. The balance of the
outstanding capital stock was simultaneously purchased by Transmedia
Asia on terms similar to the terms of the Company's purchase.
Acquisition of the 50% interest in Countdown has been accounted for
using the purchase accounting method. The cost of acquisition was
calculated as $2,658,156 giving rise to goodwill of $2,745,964.
Goodwill is amorgised over a 15 year period. The results of operations
of Countdown has been included from April 3, 1997.
3. RELATED PARTY TRANSACTIONS
The net amounts due from/(to) related parties consist of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1996 1997
---- ----
<S> <C> <C>
E Guinan III $ -- $ 17,802
International Advance Inc 20,946 86,401
Transmedia Asia Pacific, Inc. ("Transmedia Asia") 93,300 (336,813)
E Knight -- (85,719)
Partech (4,571)
J V Vittoria -- (1,000,000)
TMNI International Inc. ("TMNI") -- (250,000)
----------- -----------
$ 114,246 $(1,572,900)
=========== ===========
</TABLE>
The above loans to related parties and from Transmedia Asia are
unsecured, non interest bearing and repayable on demand. The loans
received from E Knight and Partech is in the form of shares in
Transmedia France which are repayable on demand. The loan received from
J V Vittoria is secured on the Company's share of Countdown Holdings
Limited, bears interest at a rate of 12% per annum and is repayable on
September 27, 1997. The Company issued TMNI a promissory note in the
principal amount of $250,000, payable on April 2, 1998 and bearing
interest at the rate of 10% per annum. The promissory note are to be
convertible at the holder's option into common stock of the issuer at
the rate of $1.20 per share. Information regarding the activity with
respect to the amounts due from/(to) related parties is as follows:
<TABLE>
<CAPTION>
E Guinan III International Transmedia
Advance, Inc. Asia Pacific Inc.
------------ ------------- -----------------
<S> <C> <C> <C>
Balance at September 30, 1996 $ -- $ 20,946 $ 93,300
Additions 202,354 329,876 65,244
Amounts charged -- 196,908 620,243
Amounts collected (184,552) (461,329) (1,115,600)
--------- --------- -----------
Balance at June 30, 1997 $ 17,802 $ 86,401 $ (336,813)
========= ========= ===========
</TABLE>
<TABLE>
<CAPTION>
E Knight Partech J V Vittoria TMNI
-------- ------- ------------ ----
<S> <C> <C> <C> <C>
Balance September 30, 1996 $ -- $ -- $ -- $ --
Loan received (85,719) (4,571) (1,000,000) --
Promissory note -- -- -- (250,000)
Amounts Collected -- -- -- --
-------- ------- ----------- ---------
Balance June 30, 1997 $(85,719) $(4,571) $(1,000,000) $(250,000)
======== ======= =========== =========
</TABLE>
8
<PAGE> 11
TRANSMEDIA EUROPE, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. OTHER ASSET
The other asset consists of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1996 1997
---- ----
<S> <C> <C>
Investment in option to acquire:
- National Helpline Services Pty Limited $ -- $142,946
===== ========
</TABLE>
In October 1996 the Company made an investment of $134,741,
subsequently increasing to $142,946 for ongoing legal costs, to acquire
a renewable 6 month option to acquire 50% of the share capital of
National Helpline Services Pty Limited ('NHS'). Transmedia Asia
Pacific, Inc. acquired an option, on identical terms to the Company,
over the remaining 50% share capital of NHS. Although the 6 month
option has expired, the Company is currently in ongoing negotiations
with the NHS management to acquire 50% of that company. The Company
currently believes that the option cost will be offset against the
purchase consideration on completion.
5. PROPOSED MERGER
The Company entered into an Agreement and Plan of Reorganization (the
'Agreement'), dated as of February 10, 1997, with Transmedia Asia
Pacific, Inc., a Delaware corporation, the Common Stock of which is
quoted on the NASDAQ Small Cap Market ('Transmedia Asia'), Transmedia
Europe Acquisition Corporation, a Delaware corporation and wholly-owned
subsidiary of the Company ('Europe Acquisition'), and Transmedia Asia
Acquisition Corporation, a Delaware corporation and wholly-owned
subsidiary of the Company ('Asia Acquisition').
Under the terms of the Agreement, among other things (i) the Company
will make a contribution to the capital of Europe Acquisition by
conveying substantially all of the Company's assets, except for its
equity interest in Transmedia La Carte Restaurant S.A., to Europe
Acquisition; and (ii) immediately thereafter Asia Acquisition will
merge with and into Transmedia Asia pursuant to which Transmedia Asia
will be the surviving entity and become a wholly-owned subsidiary of
the Company and holders of Common Stock of Transmedia Asia will be
entitled to receive 0.9109 of a share of Common Stock of the Company
for each Transmedia Asia share previously owned.
At the present time the Agreement has expired by its terms. It is
possible that the Agreement may be extended in the future.
6. CONTINGENT LIABILITY
The Company did not withhold any amounts from Edward J Guinan III's
remuneration with respect to either U.S. or U.K. taxes through March
31, 1997. Such treatment was used pending resolution by Edward J Guinan
III of his tax residence. Mr Guinan has provided 400,000 shares of the
Company's Common Stock and 400,000 shares of Transmedia Asia Pacific,
Inc.'s Common Stock which have been sold privately realising pound
sterling 293,753. The proceeds have been used to purchase a tax
certificate against any potential tax liabilities of the Company and
Transmedia Asia Pacific, Inc.. Any excess proceeds will be first used
to repay any loans of Mr Guinan and his affiliates with the balance of
the proceeds to be paid to him. There can be no assurance as to whether
the proceeds will be adequate to cover any potential liabilities of the
Company.
9
<PAGE> 12
ITEM 2
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
The discussion and analysis of financial condition and results of operations
should be read in conjunction with the consolidated financial statements and the
related disclosures.
The nature of the Company's business is such that there is a lead time before
profitable operations can be anticipated. This is demonstrated in the financial
results for the three month periods ended June 30, 1997 and 1996 and the nine
month periods ended June 30, 1997 and 1996. The success of the Company is
dependent upon increasing the number of cardholders ('Company Cardholders') of
the Company's card ('The Restaurant Card') and the number of restaurants
('Company Participating Restaurants'), as well as obtaining increased usage of
The Restaurant Card by Company Cardholders. The Company's joint venture
marketing partners are predominantly large size organisations, with lengthy
internal procedures. Consequently, preparing campaigns for launch and the
resulting anticipated increase in Company Cardholders is taking considerably
longer than was initially anticipated. As of August 8, 1997 the Company had
approximately 48,850 Company Cardholders and 435 Company Participating
Restaurants.
Certain statements in this Report under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere
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: the loss of a large number of
Company Cardholders or Company Participating Restaurants; general economic and
business conditions; industry capacity; industry trends; demographic changes;
competition; 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 to comply with, government regulations; and other factors referenced
in this Report.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
The Company generated revenues of $761,024 for the three months ended June 30,
1997, a decrease of 5% over the comparable 1996 period. The 5% decrease in
revenues is due to continued low level usage by MBNA campaign Company
Cardholders and a trial period of a quarterly, in place of a bi-monthly,
circulation for the restaurant directory to Company Cardholders. The Company
increased its number of Company Cardholders from approximately 22,500 at June
30, 1996 to 48,800 at June 30, 1997 largely as a result of the 26,000 Company
Cardholders produced by the MBNA campaign since August 1996. The Company
decreased its number of Company Participating Restaurants from 480 at June 30,
1996 to 435 at June 30, 1997. This decrease is attributable to the Company's
policy of rationalising Participating Restaurants with low levels of business.
Membership fees for the three months ended June 30, 1997 of $123,000 are 15%
lower than for the three months ended June 30, 1996. This decrease is as a
result of a combination of membership fees in the UK being subject to UK sales
tax (VAT) since May 1996, which the Company has borne as a cost, together with
an increased number of 20% saving Company Cardholders (no membership fee
payable), netted against an overall increase in the Cardholder base.
Cost of sales amounted to $503,864 for the three months ended June 30, 1997, an
decrease of 5% over the comparable 1996 period, this is consistent with the 5%
decrease in revenues. Cost of sales are approximately 50% of the gross food and
beverages value consumed by Company Cardholders and represents the recovery of
the advances ('Restaurant Credits') made by the Company to the respective
Company Participating Restaurants. Selling, general and administrative expenses,
consisting primarily of the costs of operations, for the three months ended June
30, 1997 amounted to $925,643 representing an increase of 1% over the comparable
1996 period.
Transmedia France incurred losses of approximately $682,565 for the three months
ended June 30, 1997, an increase of 107% over the comparable 1996 period, after
revenues of $78,187, an increase of 4% over 1996,. The increase in losses is
principally due to $360,000 incurred on a joint card marketing campaign with
Societe Generale, a leading French bank. After taking account of the
amortization of the Company's share of the license fee and the royalty
receivable from Transmedia France, the Company's share of those losses amounted
to $294,414. For the three months ended June 30, 1996 Transmedia France incurred
losses of approximately $329,659 after generating revenues of $75,000. The
Company's share of those losses amounted to $126,504. Countdown Holdings Limited
incurred losses of approximately $76,414 after revenues of $2,284,454 for the
three months ended June 30, 1997. The Company's share of those losses amounted
to $38,207. Countdown currently has more than 6 million members and operations
in 47 countries around the world. The Countdown card provides a buyers'
advantage program which offers a wide range of savings in approximately 80,000
establishments.
10
<PAGE> 13
ITEM 2
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company earned $1,235 and $nil for the three months ended June 30, 1997 and
1996, respectively, from the temporary investment of excess cash funds. Interest
payable of $37,581 and $nil for the three months ended June 30, 1997 and 1996,
respectively, relates to interest payable on loans from related parties taken
out in the period. The Company remains in a net operating loss carry forward
position for income tax purposes and no tax benefit has been recognised for the
three months ended June 30, 1997. The Company incurred a net loss of $948,055,
for the three months ended June 30, 1997, an increase of 41% over the comparable
1996 period. This increase is primarily due to a 5 % decrease in revenues, a 1%
increase in selling, general and administrative expenses and a 163% increase in
share of losses from affiliated companies as detailed above .
NINE MONTHS ENDED JUNE 30, 1997 COMPARED TO NINE MONTHS ENDED JUNE 30, 1996
The Company generated revenues of $2,513,071 for the nine months ended June 30,
1997, an increase of 8% over the comparable 1996 period (2% after deducting for
foreign exchange movements). The 8% increase in revenues is principally due to
the increase in the number of Company Cardholders. Membership fees for the nine
months ended June 30, 1997 of $368,250 are 13% lower than 1996. This decrease is
as a result of a combination of membership fees in the UK being subject to UK
sales tax (VAT) since May 1996, which the Company has borne as a cost, together
with an increased number of 20% saving Company Cardholders (no membership fee
payable), netted against an overall increase in the Cardholder base.
Cost of sales amounted to $1,673,521 for the nine months ended June 30, 1997, an
increase of 8% over the comparable 1996 period (2% after deducting for foreign
exchange movements), in line with the 8% increase in revenues. Cost of sales are
approximately 50% of the gross food and beverages value consumed by Company
Cardholders and represents the recovery of the Restaurant Credits made by the
Company to the respective Company Participating Restaurants. Selling, general
and administrative expenses, consisting primarily of the costs of operations and
goodwill amortization, for the nine months ended June 30, 1997 amounted to
$3,007,749 representing an increase of 15% over 1996. The increase can be
attributed to professional fees of $256,000 incurred through the end of the nine
month period for work on the proposed merger with Transmedia Asia Pacific, Inc.
and $66,696 of goodwill amortization arising principally on the acquisition of
Countdown.
Transmedia France incurred losses of approximately $1,321,610 after revenues of
$170,387 for the nine months ended June 30, 1997, an increase of 42% of the
comparable 1996 period. Transmedia France commenced operations on a trial basis
in April 1996. The increase in losses is principally due to $360,000 incurred
during the three months ended June 30, 1997 on a joint card marketing campaign
with Societe Generale. After taking account of the amortisation of the Company's
share of the license fee and the royalty receivable from Transmedia France, the
Company's share of those losses amounted to $611,451. For the nine months ended
June 30, 1996 Transmedia France incurred pre-trading and on going losses of
approximately $930,000. The Company's share of those losses amounted to
$427,000. Countdown Holdings Limited incurred post acquisition losses of
approximately $76,414 after revenues of $2,284,454 for the three months ended
June 30, 1997. The Company's share of those losses amounted to $38,207. In June
1997, the Company relocated its UK operation to the Countdown facilities in
south west London. Significant progress has been made to integrate the two
operations and management is in the process of extracting operating cost savings
of combining the two operations.
The Company earned $6,236 and $8,096 for the nine months ended June 30, 1997 and
1996, respectively, from the temporary investment of excess cash funds. Interest
payable of $37,581 for the nine months ended June 30, 1997 relates to interest
payable on loans from related parties. The Company remains in a net operating
loss carry forward position for income tax purposes and no tax benefit has been
recognised for the nine months ended June 30, 1997.
The Company incurred a net loss of $2,576,367 for the nine months ended June 30,
1997, an increase of 34% over the comparable 1996 period. This increase is
primarily due to the 8% decrease in revenues, the 8% decrease in cost of sales
and 15% increase in selling, general and administrative expenses together with a
43% increase in the Company's share of Transmedia France losses as detailed
above.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had a working capital deficit of $1,961,952
and an accumulated deficit since inception of $9,485,295. The Company requires
substantial additional funds to move forward with its business plans and to
satisfy substantial amounts currently due creditors. At June 30, 1997,
approximately $1,135,000 was currently due creditors, a significant portion of
which is well past due. The Company is currently seeking to raise up to
$1,250,000 by means of an equity financing, the proceeds of which will be used
in connection with the possible acquisition of NHS (see below) and for working
capital, including the repayment of a portion of amounts due creditors and
royalties under the Transmedia License (see below). Although the Company
anticipates that its efforts to raise additional capital will be successful,
there can be no assurance with respect thereto.
11
<PAGE> 14
ITEM 2
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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 being held by
Edward J. Guinan III, the Chairman of Board of Directors 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 Transmedia 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
Transmedia 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 utilisation by the Company of its rights under the
Transmedia License.
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 were used as working capital in respect of the utilisation by
the Company of its rights under the Transmedia License. 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.
On October 15, 1993 the Company entered into an agreement with Bostoner
International, pursuant to which Bostoner International agreed to Provide
certain consulting and financial advisory services to the Company through
December 31, 1996. Pursuant to such agreement, the Company has issued 700,000
shares of restricted Common Stock to Bostoner International.
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 Transmedia France and to provide
working capital to existing operations.
In July 1996 the Company completed a private placement of 892,857 shares of
Common Stock at a price of $1.40 per share. The net proceeds of $1,235,000 have
been used to provide working capital to existing operations. In December 1996
the Company issued, in a private placement, 556,250 shares of Common Stock at a
price of $2.00 per share together with warrants to purchase 185,417 shares of
Common Stock, which expire in December 1999 and have an exercise price of $2.00
per share. The net proceeds of $1,097,500 are being used to provide working
capital to existing operations.
In December 1996 Transmedia Network, Inc. and its affiliate TMNI agreed, at the
Company's request, to amend the Transmedia License. The principal revisions
allowed the Company to expand into new businesses, acquire Countdown and
undertake a corporate restructuring. In consideration a $750,000 fee was paid on
April 3, 1997 when the acquisition of Countdown was completed. This fee was
split between the Company and Transmedia Asia Pacific, Inc. and took the form of
$125,000 each in cash to TMNI and each agreed to issue a promissory note in the
principal amount of $250,000 and bearing interest at the rate of 10% per annum.
The promissory notes are to be convertible at the holder's option into common
stock of the issuer at the rate of $1.20 per share. A $250,000 fee, split
between the Company and Transmedia Asia Pacific, Inc. subject to joint and
several liability, will also be payable when, and if, a corporate restructuring
is completed.
In October 1996 the Company made an investment of $134,741, subsequently
increasing to $142,946 for ongoing legal costs, to acquire a renewable 6 month
option to acquire 50% of the share capital of National Helpline Services Pty
Limited ('NHS'). NHS is an Australian business based in Sydney which operates an
innovative telephone helpline and medical evacuation business. Its main clients
are businesses in the financial services sector who are seeking to augment the
package offered to their customers. As of December, 1996, NHS had approximately
4 million members in Australia. Transmedia Asia Pacific, Inc. acquired an
option, on identical terms to the Company, over the remaining 50% share capital
of NHS. A further $8,205 for NHS-related legal fees has been capitalised within
the investment cost of the NHS option during the three months ended March 31,
1997. Although the 6 month option has expired, the Company is currently in
ongoing negotiations with the NHS management to acquire 50% of that company. The
Company currently believes that if the acquisition occurs the option cost will
be offset against the purchase consideration.
On April 3, 1997, the Company purchased from Mr C.E.C. Radbone approximately 50%
of the outstanding capital stock of Countdown. Countdown, through its
wholly-owned operating subsidiary, Countdown Plc, is an international provider
of membership discount services. The balance of the outstanding capital stock
was simultaneously purchased by Transmedia Asia Pacific, Inc. ("Transmedia
Asia") on terms similar to the terms of the Company's purchase.
12
<PAGE> 15
ITEM 2
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
In payment of the purchase price for Countdown on April 3, 1997, the Company
issued 1,200,000 shares of its Common Stock, $0.00001 par value per share and
paid pound sterling 500,000 (approximate U.S. Dollar equivalent as of April 3,
1997 was $800,000) in cash. In addition, the Company granted Mr Radbone an
option to purchase up to 250,000 shares of Common Stock at a purchase price of
$1.00 per share.
The cash portion of the purchase price was funded by a $1,000,000 loan from a
director and stockholder of the Company. The loan matures on September 27, 1997,
bears interest at the rate of 12% per annum, and is collateralized by a pledge
of all of the shares purchased by the Company from Mr Radbone. In connection
with the loan, the Company issued to the director and stockholder five-year
warrants to purchase up to 125,000 shares of Common Stock at $1.25 per share.
In connection with the acquisition, the Company and Transmedia Asia each agreed
to pay $125,000 in cash to TMNI and each agreed to issue TMNI a promissory note
in the principal amount of $250,000, payable on April 2, 1998 and bearing
interest at the rate of 10% per annum. The promissory notes are to be
convertible at the holder's option into common stock of the issuer at the rate
of $1.20 per share. The Company agreed to pay such amounts in order to obtain
the consent to the Countdown acquisition , which consent was required by the
terms of the master license agreement from TMNI under which the Company operates
its discount restaurant charge card business.
Subsequent to granting a banking license to Transmedia France in January 1997,
the Bank of France raised certain questions regarding the application of certain
European Economic Union regulations to the capitalization of Transmedia France.
Transmedia France is attempting to clarify and resolve these questions. If
additional requirements are imposed, it is possible that Transmedia France could
lose its French banking license.
As previously reported with the formation of Transmedia France, the Company
entered into a shareholders agreement with the other shareholders of Transmedia
France. Under the shareholders agreement, the other shareholders have put
options in years 2 and 4. The basis for the 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. The Company is discussing with other shareholders of
Transmedia France modification of the put option of such shareholders. Such
modification could take the form of deferral, elimination and/or payment of the
put obligation in securities of the Company in lieu of cash. If the put option
were exercised in its current form, which exercised would occur commencing in
late September 1997, Transmedia Europe would not have sufficient resources to
meet the put obligation.
Due to the shortage of funds, the Company has failed to pay approximately
$55,000 in royalties owing under the Transmedia License. The Company is in
discussions regarding an extension of the time for payment. Failure to pay such
royalties could result in the loss of the Transmedia License in all licensed
territories, including the United Kingdom.
In addition to the investments above, there were cash inflows from related
parties of $28,559 and $179,123 for the three months ended June 30, 1997 and
1996, respectively. There were cash inflows from related parties of $346,856 and
$400,844 for the nine months ended June 30, 1997 and 1996, respectively. On
March 27, 1997 International Advance, Inc., a company of which Edward J Guinan
III, Chairman of the Company, is the principal shareholder and an officer and
director , assigned the Countdown option agreement at cost to the Company and
Transmedia Asia Pacific, Inc. for a consideration of approximately $205,000
(125,000 sterling) each and related legal costs of $59,006 each.
Net cash used in operating activities for the three months ended June 30, 1997
and 1996 was $176,171 and $134,348, respectively, and for the nine months ended
June 30, 1997 and 1996 was $732,023 and $992,211, respectively, mainly resulting
from the net loss for the relevant periods. Of these amounts $48,321 represents
and $265,059 represent the net cash inflow for the three months ended June 30,
1997 and 1996, respectively, and $57,137 and $48,649 represents the net cash
inflow for the nine months ended June 30, 1997 and 1996, respectively, for
advances to Company Participating Restaurants. The Company continues to improve
returns from Company Participating Restaurants by tighter control of restaurant
advances. The cash outflows were funded by the two 1996 issues of Common Stock
and the loan received from a director and stockholder of the Company in April
1997.
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 Transmedia License as disclosed above and any potential
commitments that may be made in connection with the possible acquisition of an
interest in NHS, 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.
13
<PAGE> 16
ITEM 2
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company entered into an Agreement and plan of Reorganization (the
'Agreement'), dated as of February 10, 1997, with Transmedia Asia Pacific, Inc.,
a Delaware corporation, the Common Stock of which is quoted on the NASDAQ Small
Cap Market ('Transmedia Asia'), Transmedia Europe Acquisition Corporation, a
Delaware corporation and wholly-owned subsidiary of the Company ('Europe
Acquisition'), and Transmedia Asia Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of the Company ('Asia Acquisition').
Under the terms of the Agreement, among other things (i) the Company will make a
contribution to the capital of Europe Acquisition by conveying substantially all
of the Company's assets, except for its equity interest in Transmedia France, to
Europe Acquisition; and (ii) immediately thereafter Asia Acquisition will merge
with and into Transmedia Asia pursuant to which Transmedia Asia will be the
surviving entity and become a wholly-owned subsidiary of the Company and
stockholders of Common Stock of Transmedia Asia will be entitled to receive
0.9109 of a share of Common Stock of the Company. At this time the Agreement has
expired without being completed. There is no assurance when or if a merger will
be affected nor as to the terms of any such merger.
The Company did not withhold any amounts from Edward J Guinan III's remuneration
with respect to either U.S. or U.K. taxes through March 31, 1997. Such treatment
was used pending resolution by Edward J Guinan III of his tax residence. Mr
Guinan has provided 400,000 shares of the Company's Common Stock and 400,000
shares of Transmedia Asia Pacific, Inc.'s Common Stock which have been sold
privately realising pound sterling 293,753. The proceeds have been used to
purchase a tax certificate against any potential tax liabilities of the Company
and Transmedia Asia Pacific, Inc.. Any excess proceeds will be first used to
repay any loans of Mr Guinan and his affiliates with the balance of the proceeds
to be paid to him. There can be no assurance as to whether the proceeds will be
adequate to cover any potential liabilities of the Company.
In June 1997, the Company was notified by the Nasdaq SmallCap Market that the
bid price of the Company's Common Stock has fallen below the minimum acceptable
level of $1.00 per share and that the shareholders' equity level of $2,000,000
had also not been met. Nasdaq allowed the Company until September 10, 1997 to
demonstrate compliance. If the Company fails to satisfy the continued listing
criteria within such time frame, the Company's securities could be delisted.
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.
14
<PAGE> 17
TRANSMEDIA EUROPE INC. AND SUBSIDIARIES
PART II: OTHER INFORMATION
Item 5 Other Information
In July 1997, Mr Edward Guinan III was elected Chairman of the Board of
Directors of the Company and Mr Paul Harrison succeeded to the offices of
President, Chief Executive Officer and Treasurer/Chief Financial Officer. Mr
Harrison is acting as the Company's principal financial officer pending the
hiring of a new Chief Financial Officer.
Item 6: Exhibits and Reports on Form 8-K
a) Exhibits:
b) Reports on Form 8-K: - An amendment to report on Form 8-K was filed on June
16, 1997 regarding the acquisition of 50% of the outstanding capital of
Countdown Holdings Limited.
15
<PAGE> 18
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.
By /s/ Paul L. Harrison
- ----------------------------------------------------------
PAUL L. HARRISON
Chief Executive Officer and Duly Authorised Representative
August 15, 1997
16
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