<PAGE>
UNITED STATES
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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________to_______________
Commission file number 0-26368
---------
TRANSMEDIA ASIA PACIFIC, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3760219
------------------------------- -------------------------
(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
--------------------------
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 No X
---- ----
19,521,316 Shares, $.00001 par value, as of June 30, 1998
(Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date)
<PAGE>
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
PART I: CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<S> <C>
ITEM 1 ........................................................................................Pages 1-14
Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheet as of June 30,1998 and September 30, 1997
Consolidated Statement of Operations for the three months ended June 30, 1998
and 1997 and the nine months ended June 30, 1998 and 1997
Consolidated Statement of Cash Flows for the nine months ended June 30, 1998 and 1997
Notes to the Consolidated Financial Statements
ITEM 2 .......................................................................................Pages 15-17
Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II: OTHER INFORMATION ......................................................................Page 18
SIGNATURES .......................................................................................Page 18
</TABLE>
The consolidated financial statements are unaudited. However, management
believes that all necessary adjustments (which include only normal recurring
accruals) have been reflected to present fairly the financial position of the
company at September 30, 1997 and June 30, 1998, the results of its operations
for the three and nine months ended June 30, 1998 and 1997 and the changes in
its cash flows for the nine months ended June 30, 1998 and 1997
<PAGE>
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
(Unaudited) (Audited)
----------- -------------
<S> <C> <C>
Assets
- ------
Current assets
Cash and cash equivalents $ 749,286 $ 13,104
Trade accounts receivable 1,015,528 56,563
Restaurant credits (net of allowance for irrecoverable
credits of $31,056 at June 30, 1998 and of
$114,610 at September 30, 1997) 197,516 301,815
Amounts due from related parties (note 15) 828,345 258,533
Prepaid expenses and other current assets 1,278,780 18,784
----------- -----------
Total current assets 4,069,455 648,799
----------- -----------
Non current assets
Investment in affiliated company (Note 9) 3,721,336 2,715,442
Property and equipment, (net of accumulated
depreciation of $519,057 at June 30, 1998 and
$106,260 at September 30, 1997) 282,112 94,250
Intangible and other assets, (net of accumulated
amortisation of $736,561 at June 30, 1998 and
$643,847 at September 30, 1997) (note 10) 1,104,229 1,196,943
Goodwill, (net of accumulated
amortisation of $151,614 at June 30, 1998 and
$ Nil at September 30, 1997) (note 11) 3,978,332 0
Other assets 274,631 142,946
----------- -----------
Total assets $13,430,095 $ 4,798,380
----------- -----------
----------- -----------
</TABLE>
See accompanying notes
1
<PAGE>
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
(Unaudited) (Audited)
------------ -------------
<S> <C> <C>
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities
Trade accounts payable $ 900,454 $ 267,232
Deferred membership fee income 205,276 104,375
Accrued liabilities 1,223,384 330,908
Deferred cost of investment 1,506,168 0
Amount due to related parties (note 15) 1,447,578 1,345,712
Notes payable 1,584,798 0
------------ ------------
Total Current Liabilities $ 6,867,658 $ 2,048,227
------------ ------------
Stockholders' equity
Common stock, $0.00001 par value per share
Authorised 95,000,000 shares;
(19,521,316 issued and outstanding at June 30, 1998
and 15,249,221 at September 30, 1997) 196 153
Additional paid in capital 14,823,726 9,962,922
Cumulative foreign currency translation 562,114 163,719
adjustment
Accumulated deficit (9,319,681) (7,376,641)
------------ ------------
Total Stockholders' Equity 5,966,355 2,750,153
------------ ------------
Minority interest 496,082 0
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,430,095 $ 4,798,380
------------ ------------
------------ ------------
</TABLE>
See accompanying notes
2
<PAGE>
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Total revenues 1,539,076 540,556 3,291,867 1,695,231
Cost of sales (208,556) (324,247) (786,913) (1,012,283)
----------- ----------- ----------- -----------
Gross profit 1,330,521 216,309 2,504,954 682,948
Selling, general and administrative expenses (1,731,232) (877,940) (4,089,475) (2,542,221)
----------- ----------- ----------- -----------
Profit/Loss) from operations (400,711) (661,631) (1,584,521) (1,859,273)
Share of profits/(losses) of associated company (167,428) (38,207) (161,450) (38,207)
Interest income/(expense) 45,872 (32,382) 48,808 (13,888)
----------- ----------- ----------- -----------
Loss before income taxes (522,267) (732,220) (1,697,163) (1,911,368)
Income taxes (56,418) 0 (56,418) 0
----------- ----------- ----------- -----------
Loss after income taxes (578,685) (732,220) (1,753,581) (1,911,368)
Minority Interest (114,376) 0 (189,459) 0
----------- ----------- ----------- ----------
Net loss $ (693,061) $(732,220) $ (1,943,040) $(1,911,368)
Loss per common share $(0.04) $(0.05) $(0.12) $(0.13)
Weighted average number of common 18,999,338 15,249,221 17,075,112 14,347,584
shares outstanding
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes
3
<PAGE>
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine months ended Nine months ended
June 30, 1998 June 30, 1997
----------------- -----------------
<S> <C> <C>
Cash flows from Operating Activities:
- - Net loss $(1,943,040) $(1,910,882)
Adjustment to reconcile net loss
to net cash used in operating activities
- - Depreciation 184,583 23,793
- - Amortization of intangible assets 244,328 138,212
- - Provision for irrecoverable restaurant credits 100,000 34,436
- - Share of associated company losses 161,450 38,207
- - Unrealised foreign exchange losses 237,813 0
Changes in assets and liabilities:
- - Trade accounts payable 33,222 9,682
- - Accrued liabilities 665,616 100,773
- - Restaurant credits 4,299 101,937
- - Prepaid expense and other current assets (924,584) 106,426
- - Trade accounts receivable (158,965) 0
- - Write-off of Hawaii option 0 150,000
- - Deferred membership fees 100,901 27,995
----------- -----------
Net cash used in operating activities (1,326,092) (1,179,421)
----------- -----------
Cash flows from investing activities:
- - Due from/(to) related parties (467,946) (496,514)
- - Disposal/(purchase) of property and equipment (143,415) (2,147)
- - Purchase of NHS (2,227,959) (142,946)
- - Purchase of Countdown 0 (1,209,656)
- - Loan to Countdown (270,545) 0
- - Purchase of Logan Leisure (570,547) 0
- - Purchase of Breakaway (126,748) 0
----------- -----------
Net cash used in investing activities (3,807,160) (1,851,263)
----------- -----------
Cash flows from financing activities:
- - Bank overdraft 0 (29,811)
- - Net proceeds received from issuance of:
common stock 3,934,595 1,097,500
- - NHS cash acquired 0 1,000,000
- - Issuance of notes 1,584,798 0
----------- -----------
Net cash (used in)/provided by financing activities 5,519,393 2,067,689
----------- -----------
Effect of foreign currency on cash 160,582 3,151
Minority Interest 189,459 0
----------- -----------
Net (decrease)/increase in cash and cash equivalents 736,182 (959,844)
Cash and cash equivalents at beginning of period 13,104 1,171,305
----------- -----------
Cash and cash equivalents at at end of period $ 749,286 $ 211,461
----------- -----------
----------- -----------
</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
4
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Note 1 - The Company
Transmedia Asia Pacific, Inc. ("TMAP" or "the Company") is a Delaware
corporation which was organized in March 1994 and commenced operations in
Sydney, Australia in November 1994. On May 2, 1994 the Company acquired from
Conestoga Partners II Inc. ("Conestoga") the rights Conestoga had previously
acquired from Transmedia Network, Inc. ("Network"), pursuant to a Master License
Agreement ("License Agreement") dated March 21, 1994. The rights acquired were
an exclusive license (the "License") to use certain trademarks and service
marks, proprietary computer software programs and know-how of Network in
establishing and operating a restaurant discount charge card business. The
licensed territories comprise all Asian and Pacific Rim countries including
Japan, China, Hong Kong, Taiwan, Korea, the Philippines and India (the "Licensed
Territories"). Network is an independent company which, through its affiliate
TMNI International Inc., ("TMNI"), is a shareholder of the Company.
On April 3, 1997 the Company acquired a 50% interest in Countdown Holdings plc
("Countdown"). In a simultaneous transaction Transmedia Europe, Inc. ("TME"), a
Delaware corporation which shares common directors and officers with the
Company, acquired the remaining 50% of Countdown. Founded 27 years ago,
Countdown is a leading international provider of shopping and leisure discount
benefits to approximately 6,500,000 members with over 100,000 participating
merchants in 47 countries. Countdown's head office is based in London with
further infrastructure support provided by licensees operating in 14 countries.
Within the UK market, there are approximately 25,000 participating merchants and
2,500,000 members.
On December 2, 1997, Transmedia Australia Holdings Pty Limited ("Transmedia
Australia), a company owned equally by the Company and TME, purchased 51% of the
common stock of Nationwide Helpline Services Pty. Limited ("NHS"), an Australian
company through a newly incorporated intermediary holding company. Transmedia
Australia also agreed to purchase the remaining 49% of the common stock of NHS
on or before June 30, 1998. The exercise period can be extended by the Company
and TME through September 30, 1998 (Refer Note 14 "Acquisitions" for further
details).
On May 14, 1998 the Company and TME purchased from Compass Trustees Limited 100%
of the outstanding capital stock of Porkpine Limited ("Porkpine"). The
transaction was consummated pursuant to an acquisition agreement dated May 14,
1998 between Compass Trustees Limited, the Company, TME and Gavin and Joanne
Logan. The consideration paid totalled 1,060,000 pounds sterling ($1,749,000
approximately) subject to increase or decrease by an amount equal to the net
current assets of Porkpine and subsidiaries as of the date of completion (Refer
Note 14. "Acquisitions" for further details).
On May 22, 1998 Transmedia Australia Travel Holdings Pty Limited, a company
owned equally by the Company and TME acquired from Gisborne Travel Holdings
Pty Limited ("Gisbourne") 100% of the issued share capital of Breakaway
Travel Club Pty Limited . The transaction was consummated pursuant to a Share
Sale Agreement dated March 26, 1998 between Gisbourne, Transmedia Australia
Travel Holdings Pty Limited, Peter Guy Gisbourne and Terence John Gill. The
total consideration paid was Aus$375,000 (approximately $230,000). Such
consideration was paid in cash. (Refer Note 14. "Acquisitions" for further
details).
As of June 30, 1998, Transmedia Asia Pacific, Inc., had the following equity
interests in its direct subsidiaries and affiliates:
<TABLE>
<CAPTION>
Name Country of Incorporation % Owned
<S> <C> <C>
Transmedia Australia Pty Ltd Australia 100
Transmedia Australasia Pty Ltd New Zealand 100
Transmedia Australia Holdings Pty Ltd Australia 50
Countdown Holdings plc UK 50
Porkpine Ltd Channel Islands 50
Transmedia Australia Travel Holdings Pty Ltd Australia 50
</TABLE>
All references herein to "Company" and "TMAP" include Transmedia Asia Pacific,
Inc. and its subsidiaries unless otherwise indicated.
5
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Note 2. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in conformity with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
consolidated financial statements. In the opinion of management, the statements
contain all adjustments (consisting only of normal recurring accruals) necessary
to present fairly the financial position as of June 30, 1998, the results of
operations for the three and nine months ended June 30, 1998 and 1997 and the
changes in cash flows for the nine months ended June 30, 1998 and 1997. The
results of operations for the three and nine months ended June 30, 1998 are not
necessarily indicative of the results to be expected for the full year.
The consolidated financial statements include the financial statements of the
Company and its subsidiaries and NHS. The consolidated balance sheet includes
the assets and liabilities of NHS and the consolidated statement of operations
includes the results of operations of NHS, notwithstanding the fact that the
Company's interest in the equity capital of Transmedia Australia (owner of 51%
of NHS) is 50%. This basis of presentation has been adopted because the Company
has effective control of Transmedia Australia. All significant intercompany
transactions have been eliminated in consolidation.
The September 30, 1997 balance sheet has been derived from the audited
consolidated financial statements at that date included in the Company's annual
report on Form 10-K. These unaudited consolidated financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Company's annual report on Form 10-K
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company's ability to continue as a
going concern may depend on its ability to obtain outside financing sufficient
to support its operations and complete identified acquisitions. Management
remains confident, based upon the Company's history of obtaining necessary
financing, that sufficient funds will be available to the Company to enable it
to operate for the foreseeable future and complete identified acquisitions.
However there can be no assurance given that the Company will obtain such
short-term or long-term outside financing or complete the acquisitions.
Note 3. Foreign Currencies
The reporting currency of the Company is the United States dollar. The
functional currencies of the Company's operating subsidiaries and affiliates are
UK pound sterling, Irish punt and the Australian dollar.
For consolidation purposes, the assets and liabilities of the Company's
subsidiaries are translated at the exchange rate in effect at the balance sheet
date. Consolidated statements of income for the Company's subsidiaries are
translated at the average rates of exchange during the period. Exchange
differences arising on these translations are taken directly to stockholders'
equity.
6
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Note 3. Foreign Currencies (continued)
The average exchange rates during the three and nine months ended June 30, 1998
and June 30, 1997 and the exchange rates in effect at June 30, 1998 and
September 30, 1997 were as follows:
<TABLE>
<CAPTION>
UK Pound Australian Irish
Sterling (pound) Dollar Punt
<S> <C> <C> <C>
Average exchange rates
3 months ended June 30, 1998 1.6542 0.6292 1.4067
3 months ended June 30, 1997 1.6357 0.7697 1.5257
9 months ended June 30, 1998 1.6500 0.6450 1.4100
9 months ended June 30, 1997 1.6347 0.7810 1.5884
Closing exchange rate
September 30, 1997 1.6125 0.7251 1.4545
June 30, 1998 1.6697 0.6211 1.3994
</TABLE>
Note 4. Income taxes
The Company adopts Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" which recognizes (a) the amount of taxes payable
or refundable in the current year and (b) deferred tax liabilities and assets
for the future tax consequences of events that have been recognized in an
enterprise's financial statements or tax returns.
A valuation allowance is established to reduce the deferred tax assets when
management determines it is more likely than not that the related tax benefits
will not be realised
Note 5. New Accounting Standards
Effective for the quarter ended March 31, 1998 the Company adopted Statement of
Financial Accounting Standards No. 128 "Earnings per Share". SFAS No. 128
requires that all prior period earnings per share data be restated to conform to
this standard. The adoption of this standard has not had a material effect on
the Company's restated historic earnings per share
7
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Note 6. Revenues
Revenues comprise:
(i) the retail value of food and beverage purchased from participating
restaurants by the Company's Transmedia cardholders (less the
cardholders' 20% or 25% discount) and the cardholders' membership fees,
(ii) NHS membership fees paid by sponsoring corporations, and
(iii) Travel agency commissions earned by the Teletravel division of NHS and
Breakaway Travel Club Pty Limited.
Transmedia card membership fees are recognised as revenue in equal monthly
instalments over the membership period. NHS membership fees paid by sponsoring
corporations for the provision of "helpline" services, are recognized as revenue
when received.
Note 7. License Costs
The Company evaluates the carrying value of its investment in License Costs for
impairment based on estimated future net cash flows generated by, and directly
attributable to, the Transmedia License. If the estimated future net cash flows
are less than the carrying value of the license costs, it is the policy of the
Company to recognize the impairment and adjust the carrying value of the License
Costs to their estimated fair value. In the opinion of management, there has
been no permanent impairment of the License Costs as at June 30, 1998.
Note 8. Restaurant Credits
Restaurant credits represent the total advances made to participating
restaurants less the amount recouped by the Company as a result of Company
cardholders using their cards at participating restaurants. Restaurant credits
are recouped by the Company within one year of advance and accordingly are
classified as a current asset. The amount by which such credits are recouped
equates to approximately 50% of the retail value of the food and beverage
purchased by cardholders at participating restaurants. The Company periodically
reviews the recoverability of restaurant credits and establishes an appropriate
provision against irrecoverable restaurant credits.
The funds advanced to participating restaurants are generally unsecured.
8
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Note 9. Investment in Affiliated Company
Investment in affiliated company comprises the Company's interest in Countdown
UK and Logan Leisure which are made up as follows:
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
<S> <C> <C>
Countdown UK
Cost of investment $ 2,854,347 $ 2,854,347
Share of profits/(losses)
- - Year ended September 30, 1997 (202,905) (202,905)
- - Nine months ended June 30, 1998 (163,436) 0
Amounts due from/(to) affiliates 334,545 64,000
----------- -----------
$ 2,822,551 $ 2,715,442
----------- -----------
----------- -----------
Logan Leisure
Cost of investment $ 896,799 $ 0
Share of profits/(losses)
- - From acquisition date to June 30, 1998 1,986 0
Amounts due from/(to) affiliates 0 0
----------- -----------
$ 898,785 $ 0
----------- -----------
----------- -----------
</TABLE>
Note 10. Intangible Assets
Intangible assets consist of the cost of the Transmedia License net of
amortization. The Transmedia License cost is being amortized on a straight line
basis over its estimated useful life of fifteen years from the commencement of
operations on October 1, 1993. The carrying value of the Transmedia License is
made up as follows:
Intangible assets consists of the following:
<TABLE>
<CAPTION>
License Costs
<S> <C>
Cost
Balance at September 30, 1997 1,840,790
Additions 0
-------------
Balance at June 30, 1998 1,840,790
-------------
Amortization
Balance at September 30, 1997 643,847
Charge for period 92,714
-------------
Balance at June 30, 1998 736,561
-------------
Net book value $ 1,104,229
-------------
</TABLE>
9
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Note 11. Goodwill
The Company recognises the excess of the purchase price paid over the
fair value of net assets acquired in connection with its acquisitions
as goodwill. Goodwill arising on acquisitions is being amortized on a
straight line basis usually over a period of fifteen years
<TABLE>
<CAPTION>
Goodwill
<S> <C>
Cost
Balance at September 30, 1997 0
Additions 4,129,946
-------------
Balance at June 30, 1998 4,129,946
-------------
Amortization
Balance at September 30, 1997 0
Charge for period (151,614)
-------------
Balance at June 30, 1998 (151,614)
-------------
Net book value $ 3,978,332
-------------
</TABLE>
Note 12. Notes payable
On April 29, 1998 the Company engaged in a private placement of securities. The
Placement was made pursuant to the exemption from registration afforded by
Section 4(2) of the Securities Act of 1933, as amended, and Regulation D
promulgated thereunder. The placement consisted of three (pound)250,000
(approximately $413,000) face amount, 8% promissory notes payable on November 1,
1998 and one (pound)200,000 (approximately $330,000) face amount, 8% promissory
note payable on the same date. The holders of the (pound)250,000 promissory
notes each received a three and a half year warrant to purchase 41,660 shares of
the common stock of the Company at an exercise price of $2.00 per share and the
holder of the (pound)200,000 promissory note received a warrant to purchase
33,328 shares on the same terms. The warrants are exercisable at any time after
issuance through November 1, 2001.
Note 13. Stockholders Equity
On August 7, 1997 the Company commenced a private placement (the "Placement")
pursuant to the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933, as amended, and Regulation D promulgated thereunder.
The Placement closed on December 31, 1997 upon the sale of 1,497,095 shares
of common stock at $1.00 per share resulting in gross proceeds to the company
of $1,497,095. For every three shares purchased each purchaser received a
three year warrant to purchase one share of the common stock of the Company
at an exercise price of $1.00 per share for no additional consideration. The
warrants are exercisable at any time after the date of grant for a period of
three years. In addition, in consideration of their agreement to purchase, on
a standby basis, a number of shares in the Placement, certain holders of
preferred stock of the Company were granted three-year warrants to purchase
an aggregate of 327, 656 shares of Common Stock of the Company at an exercise
price of $1.00 per share.
10
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Note 13. Stockholders Equity (continued)
On February 1, 1998 the Company commenced a private placement pursuant to the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended, and Regulation D promulgated thereunder. The Placement closed
on April 30, 1998 upon the sale of 1,950,000 shares of common stock at $1.25 per
share resulting in net proceeds to the company of $2,437,500. For every three
shares sold each subscriber received a three year warrant to purchase one share
of the common stock of the Company at an exercise price of $1.25 per share for
no additional consideration. The warrants are exercisable at any time after the
date of grant for a period of three years.
Note 14. Acquisitions
On December 2, 1997, Transmedia Australia, a company owned equally by the
Company and TME, purchased 51% of the common stock of NHS, through a newly
incorporated intermediary holding company. Effective control over Transmedia
Australia is exercised by the Company and accordingly Transmedia Australia's
accounts are consolidated in the accounts of the Company. The total
consideration paid by Transmedia Australia for its 51% interest in the equity
capital of NHS was Aus$10,000,000 (approximately $7,150,000 as at December 2,
1997). Transmedia Australia also agreed to purchase the balance of the equity
capital of NHS for Aus$2,500,000 on June 30, 1998 with the right to extend
such obligation until September 30, 1998 by paying interest at 5% per annum
("Balance Obligation"). Transmedia Australia has exercised the extension
right and accordingly the Balance Obligation, including interest thereon, is
now payable on September 30. If Transmedia Australia fail to make such
payments all amounts paid are not subject to recovery and the entire 51%
interest in NHS previously purchased will revert to its former owners for nil
consideration.
The total consideration for the 51% interest in NHS was allocated by the sellers
as follows. Aus$6,000,000 for the equity capital of NHS and Aus$4,000,000 in
sign-on fees payable to the former principals of NHS. As originally structured
the Aus$10,000,000 was to be advanced to Transmedia Australia by the Company and
TME as follows:
Equity Capital Element:
<TABLE>
<CAPTION>
Company TME Total
<S> <C> <C> <C>
Deposit 200,000 200,000 400,000
1st Instalment 1,400,000 1,400,000 2,800,000
2nd Instalment 1,400,000 1,400,000 2,800,000
Total 3,000,000 3,000,000 6,000,000
</TABLE>
The deposit was advanced to Transmedia Australia and paid to the sellers in
June, 1997. The first instalment of Aus$2,800,000 was paid in December 1997, 50%
in cash and the balance by the issuance of 500,000 of the common stock of each
of the Company and TME (valued at the then market price). The second instalment
payment date was extended as provided by the terms of the agreement until May 1,
1998 and was paid on that date along with interest of Aus$34,781.
11
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Note 14. Acquisitions (continued)
Sign-on Fees
<TABLE>
<CAPTION>
Company TME Total
<S> <C> <C> <C>
1st Instalment 1,000,000 1,000,000 2,000,000
2nd Instalment 1,000,000 1,000,000 2,000,000
Total 2,000,000 2,000,000 4,000,000
</TABLE>
The first instalment was payable on January 31, 1998 of which an aggregate of
Aus$1,250,000 could be deferred until May 1, 1998. On January 31, 1998, in
lieu of the required minimum payment of Aus$750,000, Aus$203,571 was paid in
cash and the balance was settled by a promissory note in the sum of
Aus$546,429 payable on June 30, 1998. As of the date hereof Aus$193,422 has
been paid against such promissory note leaving a balance outstanding of
Aus$353,007 together with accrued interest. The Aus$1,250,000 due on May 1,
1998 was paid together with accrued interest thereon at 5% per annum,
approximately Aus$15,240. The promissory note payable on June 30, 1998 bears
interest at 10% per annum. The second instalment was due for payment on June
30, 1998 but has been deferred until September 30, 1998.
On May 14, 1998 the Company and TME purchased from Compass Trustees Limited
100% of the outstanding capital stock of Porkpine Limited ("Porkpine"). The
Company and TME each acquired 50% of the outstanding capital stock of
Porkpine. The acquisition was completed on May 15, 1998 and has been more
fully described in a Form 8K filed May 29, 1998.
The transaction was consummated pursuant to an acquisition agreement (the
"Agreement") dated May 14, 1998 between Compass Trustees Limited, the
Company, TME and Gavin and Joanne Logan. The consideration paid totalled
1,060,000 pounds sterling ($1,749,000 approximately) subject to increase or
decrease by an amount equal to the net current assets of Porkpine and
subsidiaries as of the date of acquisition. The net current assets as of the
date of acquisition were $33,627 (approximately $20,526). The consideration
paid on consumation was as follows:
<TABLE>
<CAPTION>
Company TME Total
Pounds Sterling
<S> <C> <C> <C>
Cash 330,000 330,000 660,000
Shares of common stock:
Company -225,000 shar es 200,000 200,000 400,000
TME - 225,000 shares 200,000 200,000 400,000
--------- --------- ---------
Total 530,000 530,000 1,060,000
--------- --------- ---------
--------- --------- ---------
</TABLE>
On May 22, 1998 Transmedia Australia Travel Holdings Pty Limited, a company
owned equally by the Company and TME, acquired from Gisborne Travel Holdings
Pty Limited ("Gisborne") 100% of the issued share capital of Breakaway Travel
Club Pty Limited ("Breakaway"). The transaction was consummated pursuant to a
Share Sale Agreement (the "Agreement") dated March 26, 1998 between Gisborne,
Transmedia Australia, Travel Holdings Pty Limited, Peter Guy Gisborne and
Terence John Gill. The total consideration paid was Aus$375,000
(approximately $230,000), such consideration was paid in cash.
12
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Note 14. Acquisitions (continued)
The Company has previously described the terms of a letter of intent
to acquire a privately owned corporation engaged in a business complimentary
to that of the Company for approximately $8,500,000 of which the Company
would be responsible for one half ($4,250,000). The terms of the letter of
intent were revised on April 30, 1998 and again on July 29, 1998. Under the
revised terms the Company and TME have agreed to a purchase price of
$9,100,000, represented by 300,000 shares of the Company's common stock plus
300,000 shares of TME plus a number of shares at closing equal to $600,000 in
value plus cash of $7,900,000. In addition the sellers will receive earn out
payments over a five year period if predetermined threshold profit levels are
achieved. To date the Company and TME have made cash payments of $650,000 and
each have issued 100,000 shares of Common Stock all of which will not be
recovered if the transaction does not close. In addition, Edward J Guinan
III, Chairman of the Company and TME, has pledged 300,000 shares of each of
the Company and TME owned by him, which shares will be replaced by new shares
issued by the Company and TME if the transaction closes.
On January 9, 1998, the Company and TME entered into an agreement in
principle to purchase 85% of the issued and outstanding common stock of
Network America Inc. ("NAI"), a Texas corporation for a total consideration
$400,000 payable in cash ($200,000 each) and an undertaking from the Company
and TME to fund NAI's working capital requirements over an eighteen month
period by way a monthly loan advance of $55,555 in total ($27,777 each) an
aggregate of $1,000,000 over the eighteen month period, commencing April 1,
1998. The Company and TME advanced the purchase consideration and the April
working capital instalment against a series of secured promissory notes. The
acquisition was due to complete on April 24, 1998. However, based upon
developments at NAI the Company and TME abandoned the acquisition and
commenced legal proceedings against NAI to recover the total sums advanced of
$447,000. In July 1998 the Company and TME recovered $469,000, being the full
amount of the moneys advanced and $22,000 as a contribution to the costs of
the action.
On June 30, 1998 the Company and TME entered into an agreement in principle
to purchase 100% of the issued and outstanding capital of AwardTrack ("AT"),
a Californian corporation, for a total comprised of two elements, a fixed
element and a contingent element. The fixed element consideration will
comprise 500,000 shares in each of the Company and TME, to be delivered at
Completion of the acquisition. The contingent element will comprise 250,000
shares in each of the Company and TME. These shares will be issued to AT
against achievement of to be agreed performance criteria prior to Completion
of the acquisition.
Note 15. Related party transactions
Amounts due from/(to) related parties consist of the following:
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
<S> <C> <C>
Amounts due from
International Advance $ 140,000 $ 0
Transmedia Europe, Inc. 243,197 190,124
Transmedia UK 376,739 0
Conestoga Partners Inc. 26,260 26,260
Paul Harrison 42,149 42,149
$ 828,345 $ 258,523
---------- ----------
Amounts due to
J.V. Vittoria $1,151,891 $1,061,479
TMNI 295,687 284,233
---------- ----------
$1,447,578 $1,345,712
---------- ----------
</TABLE>
13
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Note 15. Related party transactions (continued)
The Company has, effective January 16, 1998 accepted the resignation of
Christopher Radbone as a director of the Company and its subsidiary Countdown
plc. Contemporaneous with such resignation, Countdown plc has agreed to release
Mr. Radbone from his service contract, and Mr. Radbone granted an option to
Edward J. Guinan III to purchase the shares of Common Stock of the Company held
by him at a price of $1.00 per share.
Note 16. Commitments and Contingencies
Transmedia Australia
The Company is committed, jointly with its affiliate TME through Transmedia
Australia, to purchase the balance of the equity capital of NHS for
Aus$2,500,000 on September 30, 1998 together with accrued interest at 5% per
annum from July 1, 1998. If Transmedia Australia fails to make such payment,
all amounts paid to date are not subject to recovery and the entire 51%
interest in NHS previously purchased will revert to the former owners.
Management fully intends to acquire the balance of 49% of the equity capital of
NHS. However no assurance can be given that management will have the necessary
funds available for it to acquire the balance.
The Company is also committed to pay sign-on fees of Aus$2,000,000 on September
30, 1998 and to repay a promissory note in the sum of Aus$353,007 together with
accrued interest. (Refer Note 14 "Acquisitions" for further details)
Legal proceedings
In the opinion of management there are no lawsuits or claims pending against the
Company.
14
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The following discussion should be read in conjunction with the unaudited
Consolidated Financial Statements and notes thereto.
The business of the Company is the design and supply of a range of member
benefit programs to corporations, affinity groups and individuals on an
international scale.
The future success of the Company is dependent upon its ability to increase
its membership base and broaden the range of member benefit programs offered.
The acquisition with TME of Countdown Holdings plc and 51% of the issued and
outstanding share capital of NHS has enabled the Company to commence
implementation of its strategy to create a broader based international member
benefits business.
The Company will continue to look for new opportunities within the member
benefits industry and expand its operations through acquisition and organic
growth. Management believes that while the industry has shown good growth, which
is expected to continue, this has been primarily in the United States. Outside
the United States, the international market is significantly less well-developed
providing an excellent opportunity for the Company to expand its operations from
its established base in Europe and Australasia and its network of sub-licensees
and franchisees in a number of other countries.
The Company recorded significant losses in its fiscal year ended September 30,
1997 and in prior years. Such losses and the Company's acquisition and expansion
program to date have been funded by the sale of equity securities and loan
finance. The Company's ability to continue as a going concern may depend on its
ability to obtain outside financing sufficient to support its operations and
expansion plans. Based upon the Company's history of obtaining necessary
financing, management remains confident that sufficient funds will be available
to the Company to enable it to operate for the foreseeable future and complete
identified acquisitions. However there can be no assurance given that the
Company will obtain such short-term or long-term outside financing or complete
such acquisitions. In addition there can be no assurance as to the acceptability
of the terms of any future financing.
15
<PAGE>
Results of Operations
Three Months ended June 30, 1998 compared to Three Months ended June 30, 1997
The Company generated revenues of $1,539,076 (1997: $540,556) in the three
months ended June 30, 1998, an increase of $998,520 or 184.7% over the
corresponding period in 1997, reflecting the impact of the NHS and Breakaway
acquisitions. NHS and Breakaway generated revenues of $1,159,398 and $103,199
respectively while the pre-existing business recorded a decline in revenues of
$264,077 due to lower card usage by cardholders as a result of rationalization
of the participating restaurant base.
Cost of sales totalled $208,556 (1997: $324,247) for the three months ended June
30, 1998, generating a gross profit percentage of 86.4% (1997: 40.0%). The
increase in gross profit percentage reflects the impact of the higher margin NHS
and Breakaway Travel businesses. The gross profit percentage achieved in the
period by NHS and Breakaway respectively were 90.9 % and 100% as compared to
46.0% by pre-existing operations.
Selling, general and administrative expenses totalled $1,731,232 (1997:
$877,940) for the three months ended June 30, 1997, an increase of $853,292 or
97.2% over the corresponding period in 1997. NHS and Breakaway accounted for
$846,577 and $90,299 of the increase respectively. Selling, general and
administrative expenses of pre-existing operations and head office costs were
$857,849 a decrease of 0.1% over the corresponding period in 1997.
The Company's share of profits/(losses) of its associates Countdown and Logan
Leisure were $(175,092) and $1,986 respectively for the three months ended
June 30, 1998 (1997 (38,207), Nil: ).
The minority interests in the Company comprise TME's 50% interest in Transmedia
Australia, NHS and Breakaway.
Nine months ended June 30, 1998 compared to the Nine months ended June 30, 1997
Revenues totalled $3,291,867 (1997: $1,695,231) for the nine months ended June
30, 1998, an increase of 94.2% over the corresponding period in 1997. NHS and
Breakaway revenues totalled $2,147,646 and $103,199 respectively with the
pre-existing business recording a decrease in revenues of $654,209. This
decrease is due to the impact of the refocusing and rationalisation of the
participating restaurant base and its effect on cardholder usage.
Cost of sales totalled $786,913 (1997: $1,012,283) for the nine months ended
June 30, 1998, generating a gross profit percentage of 76.1% (1997: 40.3%) The
increase in gross profit percentage reflects the impact of the higher margin NHS
and Breakaway Travel businesses. The gross profit percentage achieved in the
period by NHS and Breakaway respectively were 89.1% and 100% as compared to
43.2% by pre-existing operations.
Selling, general, and administrative expenses totalled $4,089,475 (1997:
$2,542,221) for the nine months ended June 30, 1998, an increase of 60.9%
over the corresponding period in 1997. NHS and Breakaway selling, general,
and administrative expenses totalled $1,571,774 and $90,299 respectively,
with the pre-existing business and head office recording a decrease of
$153,985 (6.1%) as compared to the corresponding period in 1997.
The Company's share of profits/(losses) of its associate Countdown was
$(169,114) for the nine months ended June 30, 1998 (1997:$(38,207)).
The minority interests in the Company comprise TME's 50% interest in
Transmedia Australia, NHS and Breakaway.
16
<PAGE>
Liquidity and Capital Reserves
The Company's audited financial statements for the year ended September 30, 1997
recorded losses for the year then ended of $3,030,445, which, when taken with
prior year results, recorded an accumulated deficit of $7,376,641 as of
September 30, 1997.
During the nine months ended June 30, 1998 the Company recorded further losses
of $1,943,040 resulting in net cash outflows from operating activities of
$1,326,092 compared to $1,179,421 for the corresponding period in 1997. During
the period the Company relied on net revenues and the net proceeds of equity
placements and bridging finance to fund its operating needs. Management has
taken steps to reduce the amount of cash used by operations, including reducing
staffing levels, however the Company's operations may not provide sufficient
internally generated cash flows to meet its projected requirements.
Additionally the Company is committed to funding a number of business
acquisitions, increasing its investment in NHS through Transmedia Australia, as
described in Notes 14 and 16 to the unaudited consolidated financial statements
for the quarter ended June 30, 1998.
In the quarter to June 30, 1998 the Company received net proceeds of $1.5
million from the private placement of 1,200,000 shares of common stock. To
supplement the funding of its operations and its acquisition program, the
Company also obtained net cash proceeds from short term loans of approximately
$1,567,750 from unaffiliated third parties (Refer Note 12 to the unaudited
consolidated financial statements).
The Company will require further capital infusions in order to meet its
acquisition commitments and the ongoing funding requirements of its operations.
Based upon the Company's history of obtaining necessary financing, management
remains confident that sufficient funds will be available to the Company to
operate in the foreseeable future and complete its investments and committed
acquisitions. However there can be no assurance given that the Company will be
able to obtain such funding. In addition there can be no assurance as to the
acceptability of the terms of any future financing.
Inflation and Seasonality
The Company does not believe that its operations have been materially influenced
by inflation in the nine months ended June 30, 1998, a situation which is
expected to continue for foreseeable future. The business of individual
Participating Restaurants may be seasonal depending on their location and the
types of food and beverage sold. However, the Company has no basis at this time
on which to project the seasonal effects, if any, on its business as a whole.
Year 2000 disclosure issues
The Company has considered the guidance of the Statement of the Commission
regarding disclosure of Year 2000 issues for public companies (Release No.
33-7558) effective date August 4, 1998. Full disclosure of Year 2000 issues
will be made in the Company's annual report on Form 10-K for the year ending
September 30, 1998.
17
<PAGE>
Part II: OTHER INFORMATION
- ------------------------------------------------------------------------------
Item 6 Exhibits and Reports on Forms 8-K
(A) Exhibits filed herewith:
None
(B) Forms 8-K filed during quarter
Form 8K - Filed June 5, 1998 - Breakaway Travel Club acquisition Form
8K/A - Amendment No.1 to Form 8K filed June 5, 1998 - Filed July 31,
1998
Form 8K - Filed May 29, 1998 - Logan Leisure acquisition
Form 8K/A - Amendment No.1 to Form 8K filed May 29, 1998 - Filed July
31, 1998
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 authorised.
TRANSMEDIA ASIA PACIFIC, INC.
By: /s/ Paul Harrison
-----------------------------------
Paul Harrison
President and Chief Financial Officer
18
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<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 749286
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0
0
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<OTHER-SE> 5966159
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