UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
Amendment No. 1
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
-----------------
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
------------------------
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days
Yes |_| No |X|
The number of shares outstanding of the issuer's common stock, $.00001 par
value, as of February 20, 1998: 16,203,459
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARY
- --------------------------------------------------------------------------------
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 December 31, 1996 and 1997 (unaudited).
Condensed Consolidated Balance Sheets as of:
- December 31, 1997 (unaudited)
- September 30, 1997
Condensed Consolidated Statements of Cash Flows for the
three months ended December 31,1996 and 1997 (unaudited)
Condensed Consolidated Statement of Changes in Stockholders
Equity for the three month periods ended
December 31, 1996 and 1997 (unaudited)
Notes to Financial Statement
ITEM 2 ............................................................. Pages 10-16
Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II: OTHER INFORMATION......................................... Page 17
SIGNATURES ......................................................... Page 18
<PAGE>
PART 1: FINANCIAL INFORMATION
ITEM 1
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
Three months ended Three months ended
December 31, 1997 December 31, 1996
(unaudited) (unaudited)
------------ ------------
Revenues $ 1,082,246 $ 564,621
Membership fees 322,076 66,384
------------ ------------
Total revenues and fees 1,404,322 631,005
Cost of sales (853,538) (359,081)
------------ ------------
Gross profit 550,784 271,924
Selling, general and
administrative expenses (2,231,609) (736,840)
------------ ------------
Loss from operations (1,680,825) (464,916)
Share of losses of associated
company (31,564) --
Interest income 1,498 6,684
------------ ------------
Loss before income taxes (1,710,891) (458,232)
Income taxes -- --
------------ ------------
Loss after income taxes (1,710,891) (458,232)
Minority interest (37,785) --
------------ ------------
Net loss $ (1,748,676) $ (458,232)
------------ ------------
Loss per common share $ (0.12) $ (0.03)
Weighted average number of common 14,610,888 13,477,325
shares outstanding
See accompanying notes to the condensed consolidated financial statements.
1
<PAGE>
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
(unaudited)
---------- ----------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 523,599 $ 13,104
Trade accounts receivable 483,754 56,563
Restaurant credits (net of allowance for
irrecoverable credits of $114,610 at
September 30, 1997 and of $ 72,651 at
December 31, 1997) 296,203 301,815
Amounts due from related parties (note 2) 68,409 322,533
Prepaid expenses and other current assets 263,256 18,784
---------- ----------
1,635,221 712,799
Total current assets
Investment in affiliate 2,702,893 2,651,442
Property and equipment, (net of accumulated
depreciation $106,260at September 30, 1997
and $ 606,605 at December 31, 1997) 245,606 94,250
Intangible and other assets, (net of accumulated
amortisation of $ 643,847 at September 30, 1997
and $ 697,799 at December 31, 1997) (note 3) 5,195,577 1,196,943
Other assets -- 142,946
---------- ----------
Total assets $9,779,297 $4,798,380
========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
2
<PAGE>
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
(unaudited)
------------ ------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities
Purchase cost liability $ 2,671,959 $ --
Trade accounts payable 397,669 267,232
Deferred membership fee income 266,155
104,375
Accrued liabilities 767,659 330,908
Amount due to related parties (note 2) 3,496,735 1,345,712
------------ ------------
Total Current Liabilities $ 7,600,177 $ 2,048,227
------------ ------------
Stockholders' equity
Preferred stock, $0.01 par value per share
Authorised 5,000,000 shares; none issued -- --
Common stock, $0.00001 par value per share
Authorised 95,000,000 shares;
(15,249,221 issued and outstanding at
September 30, 1997 and 16,249,221 at
December 31, 1997) 163 153
Additional paid in capital 10,962,912 9,962,922
Cumulative foreign currency translation
adjustment 52,233 163,719
Accumulated deficit (9,125,317) (7,376,641)
------------ ------------
Total Stockholders' Equity 1,889,991 2,750,153
------------ ------------
Minority interest 289,129 --
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,779,297 $ 4,798,380
============ ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE>
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months Three months
ended ended
December 31, December 31,
1997 1996
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Cash flows from Operating Activities:
- Net loss $(1,748,676) $ (458,232)
Adjustment to reconcile net loss
to net cash used in operating activities
- Depreciation 11,812 8,092
- Amortization of intangible assets 86,296 30,680
- Provision for irrecoverable restaurant credits (41,959) 26,091
- Deferred membership fees 161,780 (51,590)
- Amortization of deferred compensation -- --
- Share of losses in affiliate 31,564 --
Changes in assets and liabilities:
- Trade accounts payable 130,437 (61,478)
- Accrued liabilities 427,751 (31,262)
- Restaurant credits 47,571 15,688
- Prepaid expenses and other current assets (244,472) 87,891
- Trade accounts receivable (427,191) --
- Due from/(to) related parties 359,657 (359,639)
----------- -----------
Net cash used in operating activities 90,444 (793,759)
----------- -----------
Cash flows from investing activities:
- Purchase of property and equipment -- (26,969)
- Interest acquired in affiliate -- --
- Purchase of NHS (881,368) (134,741)
- Proceeds on disposal of fixed assets -- --
----------- -----------
Net cash (used in)/provided by investing activities (881,368) (161,710)
----------- -----------
Cash flows from financing activities:
- Bank overdraft -- 14,573
- Net proceeds from issuance
of common stock 1,000,000 1,097,500
----------- -----------
Net cash (used in)/provided by financing activities 1,000,000 1,112,073
----------- -----------
Effects of foreign currency on cash 41,075 32,188
Minority interest 260,344 --
----------- -----------
Net (decrease)/increase in cash and
cash equivalents 510,495 188,792
Cash and cash equivalents at
beginning of period 13,104 1,171,305
----------- -----------
Cash and cash equivalents
at end of period $ 523,599 $ 1,360,097
----------- -----------
</TABLE>
Supplemental disclosures of cash flow information:
No amounts of cash were paid for interest or income taxes for each of the
periods presented
4
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Description of business and summary of significant accounting policies
(a) Basis of Presentation
The balance sheet as of September 30, 1997 was derived from the Company's
unaudited 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,
1997 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 December 31, 1997 are not
necessarily indicative of the results to be expected for the full year.
The Company filed a registration statement with the Securities and
Exchange Commission that was declared effective on August 4, 1995.
(b) Description of business
Transmedia Asia Pacific, Inc. (the "Company") is a Delaware Corporation
which was formed in March 1994 and began business operations in November
1994. On May 2, 1994 the Company acquired from Conestoga Partners II, Inc.
("Conestoga")(see note 2) the rights Conestoga had previously acquired
from Transmedia Network, Inc. ("Network") an independent company which
owns approximately 5% of the Company through Network's affiliate TMNI
International Inc. ("TMNI"), 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 discount restaurant charge card business in
essentially all the countries in Asia and the Pacific Rim including Japan,
China, Hong Kong, Taiwan, Korea, The Philippines and India (the "Licensed
Territories").
The Company's main business activity and that of its wholly owned
subsidiaries Transmedia Australia Pty Limited and Transmedia Australasia
Pty Limited is to make `cash advances' to restaurants for food and
beverage credits from certain participating restaurants which are then
recovered as Transmedia cardholders utilize their restaurant charge card
(see note 1(c)), presently through its subsidiaries. The Company is also
active in the area of customer discounts on merchandise purchases, through
its investment in Countdown Holdings Limited. ("Countdown"), acquired in
April 1997, and in the provision of telephone helpline and lifestyle
benefits, through its acquisition of the net assets and business of
Nationwide Helpline Services Pty limited ("NHS")
As of December 31, 1997, Transmedia Asia Pacific, Inc., has equity
interests in the following company:
<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 Ltd UK 50
Transmedia Travel Holdings Pty Ltd Australia 100
</TABLE>
In August 1994 the Company registered an initial public offering of its
Common Stock with the Securities and Exchange Commission and the Company's
Common Stock traded on the NASDAQ small capital market.
The Company was initially capitalised with 7,249,500 shares. On May 26,
1994, the Company issued and sold shares of Common Stock: (I) 450,000 to
Conestoga for $450,000; (ii) 590,790 to Network, as partial consideration
for the purchase of the License; and (iii) 3,525,000 to investors in a
private placement at an offering price of $1 per share. Of the cash
proceeds from the private placement of $3,525,000, $1,000,000 was paid to
Network for further consideration (in addition
5
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1(b) Description of business (continued)
to the $250,000 paid to Network by Conestoga and reimbursed to Conestoga
by the Company) for the purchase of the License, leaving a balance, after
costs, of $2,322,212 available to the Company for use as working capital
in respect of the utilization by the Company of its rights under the
License. Initially such utilization has taken place in Australia through
the Company's wholly owned subsidiary, Transmedia Australia Pty Limited.
In the future, the Company may expand operations in other portions of the
Licensed Territories through wholly owned subsidiaries or through
unaffiliated sublicenses and franchises.
In April 1995, the Company completed a second private placement of 673,800
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
utilization by the Company of its rights under the License. The net cash
to the Company from the second private placement of shares in April 1995
was $1,892,656.
In July 1996, the Company issued 892,857 shares of Common Stock at a price
of $1.40 per share. The net proceeds of $1,235,000 were used to provide
working capital to existing operations.
In December 1996, the Company issued 556,250 shares of Common Stock at a
price of $2 per share. The net proceeds of $1,097,500 were used to provide
working capital to existing operations.
In August 1997, the Company initiated a private placement in which it sold
1,347,095 shares of Common Stock at a purchase price of $1 per share. For
every three shares purchased, each purchaser will receive, for no
additional consideration, a warrant to purchase one share of Common Stock
at $1 per share.
(c) 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 of the
recoverability of the advance if the restaurant ceases operations or
ceases to be a participating restaurant. Generally, no other forms of
collateral or security are obtained from the restaurant owners.
(d) 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. They also include the sales
from Teletravel , the travel agency division of NHS, representing the
gross sales of air tickets, holidays and other travel products.
Membership fees represent card membership income from the Transmedia card,
which are apportioned over the period to which they relate. NHS membership
fees, based upon the fee per member paid by sponsoring corporations for
the provision of various helpline services, which are taken in when they
are received, IMAN membership income paid by corporate insurance customers
for the provision of international medical case management services, to
their underlying policy holders.
6
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 (e) License Cost
The Company evaluates the carrying value of its investment in License
Costs for impairment based on an estimate of future undiscounted net cash
flows that are expected to be generated and are directly attributable to
the Transmedia License. If the sum of those estimated future undiscounted
cash flows is less than the carrying value of the license costs, it is the
policy of the Company to measure impairment on the basis of the fair value
of the license costs, using a discounted cash flow technique. In the
opinion of management, there was no permanent impairment in the carrying
value of the license costs at September 30, 1997 or at December 31, 1997.
1 (f) Earnings Per Share
During the quarter ended December 31, 1997, the Company adopted Statement
of Financial Accounting Standards No. 128, "Earnings per Share", which
requires the presentation of both basic and diluted earnings per share
amounts. Assumed exercise of options and warrants are not included in the
calculation of diluted earnings per share since the effect would be
antidilutive. Accordingly, basic and diluted net loss per share do not
differ for any period presented. The following table summarizes securities
that were outstanding as of December 31, 1997 and 1996, but not included
in the calculation of diluted net loss per share because such shares are
antidulitive:
December 31
1997 1996
---- ----
Stock options and warrants 1,713,408 1,297,619
2. Related party transactions
Amounts due from/(to) related parties consist of the following:
September 30, December 31,
1997 1997
---- ----
Amounts due from
Transmedia Europe, Inc. $ 190,124 $ --
Conestoga Partners Inc. 26,260 26,260
Paul Harrison 42,149 42,149
---------- ----------
$ 258,523 $ 68,409
---------- ----------
Amounts due to
J.V. Vittoria $1,061,479 $1,091,726
TMNI 284,233 268,698
Transmedia Europe Inc. -- 2,136,311
---------- ----------
$1,345,712 $3,496,735
---------- ----------
7
<PAGE>
Information regarding the activity with respect to the amounts due from
related parties is as follows
Conestoga Transmedia
Partners Inc. Europe Inc. P Harrison
------------- ------ ---------------
Balance at September 30, 1997 $ 26,260 $ 190,124 $ 42,149
Additions -- -- --
Amounts charged -- (190,124) --
Amounts collected -- -- --
Foreign currency movement -- -- --
--------- --------- ---------
Balance at December 31, 1997 $ 26,260 $ -- $ 42,149
========= ========= =========
The above loans are unsecured, non interest bearing, and repayable on
demand.
8
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. Intangibles
Goodwill on
Consolidation License Total
Cost
Balance at September 30, 1997 $ -- $1,840,790 $1,840,790
Additions 4,052,586 -- 4,052,586
---------- ---------- ----------
Balance at December 31, 1997 4,052,586 1,840,790 5,893,376
---------- ---------- ----------
Amortization
Balance at September 30, 1997 -- 643,847 643,847
Charge for period 22,514 31,438 53,952
---------- ---------- ----------
Balance at December 31, 1997 22,514 675,285 697,799
---------- ---------- ----------
Net book value $4,030,072 $1,165,505 $5,195,577
---------- ---------- ----------
4. Proposed merger
The Company entered into an Agreement and plan of Reorganization (the
'Agreement'), dated as of February 10, 1997, with Transmedia Europe, Inc.,
a Delaware corporation, the Common Stock of which is quoted on the NASDAQ
Small Cap Market ('Transmedia Europe'), Transmedia Europe Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of the
Transmedia Europe ('Europe Acquisition'), and Transmedia Asia Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of the
Transmedia Europe ('Asia Acquisition'). However, due to the planned
acquisition of NHS management decided to postpone the implementation of
the reorganisation plan. Following the completion of this move management
has now decided to move forward with the original plan.
Under the terms of the original Agreement, among other things (i)
Transmedia Europe was to make a contribution to the capital of Europe
Acquisition by conveying substantially all of Transmedia Europe's assets,
except for its equity interest in Transmedia La Carte Restaurant S.A. , to
Europe Acquisition; and (ii) immediately thereafter Asia Acquisition was
to merge with and into the Company pursuant to which the Company was to be
the surviving entity and become a wholly-owned subsidiary of Transmedia
Europe and stockholders of Common Stock of the Company were to be entitled
to receive 0.9109 of a share of Common Stock of Transmedia Europe. Given
the time that has lapsed from the date of the original Agreement, these
terms will be subject to a new review by the management of both companies
and their independent advisors.
5. Commitments
The Company is committed, jointly with its affiliate TME, to making
further payments in relation to the acquisition of NHS. These consist of
payments due on January 31,1998 to certain principals as sign-on fees
amounting to Aus. $2,000,000 ($1,460,000) and the second tranche for 51%
of the shares of common stock of NHS for Aus. $2,842,540 ($2,075,000).
Payment of the second tranche and Aus. $1,250,000 ($912,500) of the
sign-on fees due to the principals, may be extended by up to 90 days
provided that interest will accrue during any such extension at 5% per
annum. The Company has given notice that payment of the second tranche and
Aus. $1,250,000 ($912,500) of the sign-on fees due to the principals, due
on January 30, 1998 is being extended by the permitted 90 days and, at the
request of the principals, the payment of the portion of the sign-on fees
due on January 31, 1998 has been delayed pending their instructions. The
balance of the payments due to certain principals as sign-on fees
amounting to Aus. $2,000,000 ($1,460,000) is due on June 30, 1998 subject
to an extension of 90 days provided that interest will accrue during any
such extension at 5% per annum. The option to acquire the 49% balance of
the shares of common stock of NHS for Aus. $2,497,655 ($1,823,000) is
exercisable at any time through June 30, 1998 subject to an extension of
90 days provided that interest will accrue during any such extension at 5%
per annum. Failure to exercise this option during its term will give the
NHS principals the right to repurchase the 51% interest for nil
consideration.
9
<PAGE>
Item 2
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
notes thereto, as well as the more detailed notes contained in the Company's
annual report on form 10 K/A for the year ended September 30, 1997.
The business of the Company is the design and supply of various member benefit
programs to corporations, affinity groups and individuals.
The success of the Company is dependent upon increasing the number of members
("Company Members"), as well as broadening its product base. In particular the
joint acquisition with Transmedia Europe, Inc. ("TME") of Countdown Holdings
Limited. ("Countdown"), and the joint acquisition of the net assets and business
of Nationwide Helpline Services Limited ("NHS"), mark the start of the creation
of a broader based member benefits corporation. Management announced its
intention to merge the interests of the Company and TME during the fiscal 1997.
This process has now been reactivated following the completion of the first
stage of the NHS acquisition, and is expected to be completed in the medium
term.
The Company will continue to look for new opportunities to grow within the
member benefits industry through acquisition and organic growth. Management
believes that while the industry has grown dramatically in the USA with a number
of sizeable corporations participating, the opportunities internationally are
greater with the industry at a more immature stage of its development.
On April 3, 1997 the Company acquired a 50% interest in Countdown, whose results
are consolidated in these statements using the equity method of accounting.
Founded 27 years ago, Countdown is the leading international provider of
shopping and leisure discount benefits to approximately 6,500,000 members with
over 100,00 accepting merchants in 47 countries. Countdown's head office is
based in London, England with further infrastructural support coming from
licensees operating 14 countries internationally. Within the core UK market,
there are approximately 25,000 accepting merchants supporting approximately
2,500,000 members.
On December 2, 1997 Transmedia Australia Holdings Pty Limited ("Transmedia
Australia"), a company jointly owned with TME, indirectly purchased in
simultaneous transactions 51% of the common stock of NHS. Transmedia Australia
also acquired an option to purchase the 49% balance of NHS's common stock. The
option is exercisable at any time through June 30, 1998, and is subject to an
extension for up to 90 days. The results of NHS are reflected in these
statements using the purchase method of accounting.
The nature of the Company's Transmedia Restaurant Card program 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 December
31, 1997 and 1996 and the years ended September 30, 1997 and 1996. In order to
significantly promote the use of the Restaurant Card in the market, and at the
encouragement of TMNI, the Company's licensor, the Company embarked upon a
series of free card campaigns in fiscal 1997. It was hoped that this would lead
to a commensurate increase in transaction revenue, however the anticipated
increase in usage failed to materialise. The experience of TMNI in the USA was
similar to this.
The marketing approach of providing free membership has now been abandoned,
since Company Cardholders who enrolled on a free membership program had a low
perceived value for the product. Management will reduce the card base by those
free memberships which are not using the card - thus reducing the associated
administrative costs. New memberships will be pursues with an emphasis on the
corporate diner. Management believes that this segment of non-discretionary
spending will yield significantly greater use than the previously targeted
retail market. The other impact of this modification in the strategy has been to
refocus the restaurant base, effectively reducing the number of restaurants
displaying low usage.
10
<PAGE>
New Product Development
Countdown Direct
After detailed analysis of the Countdown product range management have decided
to launch a new direct selling platform for the Countdown card. Hitherto very
little emphasis was placed on direct marketing of the product to consumers. A
new management team with over forty years of collective direct marketing
experience, has been put together to establish a commission based network
marketing sales force on a national basis. This development represents an
important move for the company. It will enable Countdown to capture credit card
details of the member directly, and provide for a steadily growing base of
annuity type income flows from the subsequent years renewals.
E-Tailing
Countdown is about to launch a three pronged attack on the internet market
place. Prior to acquisition Countdown had not focused on the enormous
opportunities represented by this medium. Management have recognised the
potential, if correctly harnessed, to leverage the countdown business through
the internet.
Attention has focused on two new products:
Countdown Arcade
Kick Start
Countdown Arcade
Countdown Arcade has been designed to offer a dynamic and fully interactive web
site listing all of Countdowns participating merchants world-wide. The site has
firewall access allowing only bona fide members to the full merchant listings.
However, it has been designed to allow the casual browser with enough
information and examples to encourage immediate joining. Management believe that
Countdown Arcade will be the largest single collection of international
retailers and service providers of discounted products on the internet.
Members will be able to search by name, category, or location. All future
directory publications and newsletters will promote the web site heavily. It is
management's intention to use Countdown Arcade to promote other group programs
and capture credit card details and customer profiles.
Kick Start/Advertising Revenue
The underlying Countdown program has over 100,000 participating merchants in
some 47 countries. While all will be listed on the Countdown Arcade, this
additional service will provide the opportunity to have four interactive pages
allocated for this purpose. For $799 pa each retailer will have the ability to
advertise, promote , run specials etc., changing the content as frequently as
they wish. The Company, jointly with TME, has entered into a joint venture with
a quoted internet software house who will administer the program. The Kick Start
program is that it will expose their business to an international membership
base of approximately 6,500,000 consumers.
Nationwide Helpline Services
Overview
Nationwide Helpline services "NHS" was formed several years ago in Australia,
and has become the leading supplier of affinity telephone help line products to
a wide range of major corporate customers, embracing 5m members across the
country. The company describes itself as "a builder of value through
relationship marketing".
NHS offers a broad range of telephone help line services including; Legal, Tax,
Accounting, Medical, Card Protection, Lockout assistance, Emergency assistance
as well as an affinity travel business, Teletravel. In addition the group has
another division, IMAN, international medical assistance network. This business
handles the case management for individuals who become ill while travelling
abroad, for major insurance companies. In all, NHS offers a spread of assistance
and help line products covering 15 different market segments.
11
<PAGE>
Background
NHS has successfully developed new products to cross market to the existing
5,000,000 members. From the core telephone business, additional complimentary
products have been introduced to increase revenues. These new products include :
Teletravel - a virtual travel agent established to sell a broad range of
travel products to the membership base;
Break Away Travel - a travel club offering a wide range of discount travel
products and services to employees of the travel industry;
ICON - one of Australia's leading General Selling Agents handling
ticketing and reservations in Australia and New Zealand for airlines, hotel
groups and cruise companies;
NHS Insurance - a wholly owned brokerage business providing travel
insurance.
Current Operation
Key to the NHS program is the method of delivery. Below are the key points:
o All professional services are out sourced to independent practising
businesses. Advice given by telephone is from fully qualified specialists
in their field.
o These specialists are linked to the main call centre in Sydney.
o NHS pays the specialists either per call or on a flat rate basis, thereby
assuring quality advice;
o Access to the service is via a toll free number for members number
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.
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Results of Operations
Three Months Ended December 31, 1997 compared to Three Months Ended December 31,
1996
The Company generated revenues of $ 1,082,246 for the three months ended
December 31, 1997, an increase of 92% over 1996.The consolidation of NHS from
December 3, 1997 represents $714,286 of the increase. The Company's existing
operation in Australia generated revenues of $ 367,602, a decrease of 35% over
1996, reflecting the combined effect on usage of the free membership card and a
general reduction in usage resulting from a number of popular restaurants
pulling out of the program. The Company increased the number of Company
Cardholders from 21,300 at December 31, 1996 to 35,700 at December 31, 1997 and
decreased its number of Company Participating Restaurants from 370 at December
31, 1996 to 268 at December 31, 1997. The increase in Company Cardholders are a
result of the FAI and Westpac Banking Corporation campaigns during fiscal 1997,
a key feature of which was the free membership card. The reduction in Company
Participating Restaurants is part of the strategy to remove restaurants with low
activity levels from the program.
Membership fees for the three months ended December 31, 1997 of $322,076 are
significantly greater than the $66,384 reported for the three months ended
December 31, 1996. NHS generated membership fees of $277,076 for the period from
December 3, 1997. The membership fees generated by existing operations amounted
to $ 45,000 in the tree months ended December 31, 1997 a decrease of 32%,
reflecting the impact of the free membership card.
Cost of sales amounted to $853,538 for the three months ended December 31, 1997,
an increase of 239% over 1996. The cost of sales in NHS represent $614,743 of
this increase . The cost of sales in existing operations at $ 238,556 are in
line with the reduction in revenues.
Selling, general and administrative expenses, consisting primarily of the costs
of operations, for the three months ended December 31, 1997 amounted to
$2,231,609 compared to $736,840 for the three months ended December 31, 1996.
NHS represents $301,047 of the increase. Selling, general and administrative
expenses in existing operations at $1,930,562 for the three months ended
December 31, 1997 compared to $736,840 reported for 1996. This increase is
primarily due to sign-on fees of $1,258,090 incurred as part of the NHS
acquisition.
The Company's share of losses from its affiliate Countdown amounted to $31,564
in the three months ended December 31, 1997.
The Company earned $1,498 for the three months ended December 31, 1997 from the
temporary investment of excess cash funds.
The Company remains in a net operating loss carry forward position for income
tax purposes and no tax benefit has been recognized for the three months ended
December 31, 1996.
Year Ended September 30, 1997 compared to Year Ended September 30, 1996
The Company generated revenues of $1,924,908 (1996: $1,659,515 and 1995:
$1,075,517) for the year ended September 30, 1997, an increase of 16% over the
previous year. The Company increased the number of Company Cardholders from
18,000 at September 30, 1996 to 36,800 at September 30, 1997. This increase was
largely as a result of the Westpac Banking Corp. campaign launched in September
1996 and a novel marketing exercise in December 1996 with the Australian company
FAI Insurance ('FAI') as a joint marketing partner. The arrangement allows an
FAI customer, taking The Restaurant Card to reduce their insurance costs by the
25% saving on food and beverages purchased, net of taxes and service, received
from using The Restaurant Card. The Company decreased the number of Company
Participating Restaurants from 430 at September 30, 1996 to 274 at September 30,
1997. This decrease was as a result of the Company removing under performing
restaurants from the program.
Membership fees of $204,454 (1996: $230,961 and 1995: $27,564) for the year
ended September 30, 1997 show a reduction of 11% over the previous year. The
decrease is a result of an accounting adjustment in the first quarter and the
effect of the Free membership card.
Cost of sales amounted to $1,257,769 (1996: $1,098,666 and 1995: $702,723) for
the year ended September 30, 1997, an increase of 15% over the previous year.
The variance to the 16% increase is caused by the 20% discount associated to the
Free membership card. Cost of sales are approximately 50% of the gross food and
beverage value consumed by Company Cardholders and represents the recovery of
the advances ('Restaurant Advances') made by the Company to the respective
Company Participating Restaurants.
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<PAGE>
Selling, general, and administrative expenses, consisting primarily of salaries,
rents, commissions, and other general overhead costs amounted to $3,723,330
(1996: $2,819,073 and 1995: 2,476,105) for the year ended September 30, 1997, an
increase of 32% over the previous year. The increase is primarily due to the
write off of the Hawaii option of $150,000, professional fees of $118,642 for
work on the proposed merger with Transmedia Europe, additional goodwill
amortization of $276,445 to reflect a diminution in the carrying value of the
license based upon future cash flows, $112,875 of costs relating to the
termination agreement with Mr C.E.C. Radbone, a former director of the Company,
and $242,012 of unrealised foreign exchange losses arising on the restatement of
the inter-company balance between the Company and Transmedia Australia. But for
these additional expenses, the Company would have reported a small decrease for
the year in selling, general and administrative expenses.
The Company's share of losses in its associate Countdown for the period from
April 3, 1997 to September 30, 1997 was $202,905. The Company earned $31,007
(1996: $21,005 and 1995 $85,459) for the 1997 fiscal year from the temporary
investment of excess cash funds and from loans to certain stockholders.
In October 1997 Countdown recruited two managers to establish a Countdown Direct
Marketing division in the UK, to primarily sell membership directly to the
public through a network of commissioned agents. Their initiative involves the
Company in the periodic recruitment and training of agents with plans to have a
network of approximately 200 agents within the first year of operation. The
initial draft of agents completed their training in February 1998 and it is too
early to determine if the initiative will be successful.
The acquisition of Countdown provides management with the opportunity to realise
cost savings and achieve economies of scale. In June 1997 the Transmedia UK
operations relocated to Countdown's premises and the Company is seeking to
sub-let a floor of the offices it shares with TME at 11 St James's Square,
London vacated by the relocation. Management is currently reviewing means of
sharing resources and out-sourcing functions and expects to be able to achieve
significant savings in fiscal 1998
The Company remains in a net operating loss carry forward position for income
tax purposes and no tax benefit has been recognised for the year ended September
30, 1997.
Liquidity and Capital Resources
The Company requires substantial additional funds to move forward with its
business plans, including completion of the acquisition of NHS, and other
possible acquisitions, and in satisfaction of existing creditors and for the
provision of working capital. Management estimated that an amount of $8,750,000
will be required in the period to April 30, 1998 of which $3,000,000 is required
to complete the funding of NHS, $4,750,000 to fund other planned acquiaitions
and $1,000,000 as working capital to fund the Company's deficit.
The Company has no available lines of credit at the present time and in the
event that management is not successful or only partially successful in raising
the necessary funds it may have to curtail its acquisition program, with the
possible loss of deposits or payments on account of approximately $1,950,000.
No assurance can be given that the Company will be successful in obtaining
additional financing. Moreover, any additional financing, including any
financing obtained through the issuance of equity, could result in substantial
dilution to shareholders.
The Company was initially capitalized with 7,250,000 shares. On May 26, 1994,
the Company issued: (i) 450,000 shares of Common Stock to Conestoga for
$450,000; (ii) 590,790 shares were issued to Network as partial consideration
for the purchase of the Transmedia License; and (iii) 3,525,000 shares were sold
to private investors in a private placement at an offering price of $1 per
share. Of the cash proceeds of $3,525,000, $1,000,000 was paid to Network for
further consideration (in addition to the
$250,000 paid to Network by Conestoga and reimbursed to Conestoga by the
Company) for the purchase of the Transmedia License from the private placement
of shares, leaving a balance, after costs, of $2,322,212 available to the
Company for use as working capital in respect of the utilization by the Company
of its rights under the Transmedia License. Initially such utlization has taken
place in Australia through the Company's wholly owned subsidiary, Transmedia
Australia Pty Limited. In the future, the Company may expand operations in other
portions of the Licensed Territories through wholly-owned subsidiaries or
through unaffiliated sublicensees and franchisees.
In April 1995, the Company completed a second private placement of 573,800
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 utilization by
the Company of its rights under the Transmedia License. The net cash to the
Company from the second private placement of shares in April 1995 was
$1,892,656. On June
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16, 1995 the Company entered into an agreement with Nomura, Wassertein, Perella
and Co. Ltd. to provide certain consulting services through June 16, 1996.
Pursuant to such agreement, the Company issued 100,000 shares of Common Stock
and paid a $100,000 retainer to Nomura, Wasserstein, Perella and Co. Ltd.
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 for 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 Transmedia
International, Inc. agreed, at the Company's request, to amend the Transmedia
License. The principal revisions are that the Company is now permitted to expand
into new businesses, acquire Countdown PLC and undertake a corporate
restructuring. In consideration a $750,000 fee will be payable when, and if, the
acquisition of Countdown PLC is completed and a $250,000 fee will be payable
when, and if, a corporate restructuring is completed.
Net cash used in operating activities for the three months ended December 31,
1996 and 1997 was $434,120 and $269,213, respectively, mainly resulting from the
net loss for the period. Of these amounts $15,688 and $47,571 represent the net
cash inflow, respectively, for advances to Company Participating Restaurants.
In addition to the investments above, there were cash flows to related parties
of $359,639 and $115,760 for the three months ended December 31, 1996 and 1995,
respectively, of which $60,654 and $109,583, respectively, was repaid.
In October 1996, the Company made an investment of $134,741 to acquire a
renewable 6 month option over 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 Europe, Inc. acquired
an option, on identical terms to the Company, over the remaining 50% share
capital of NHS.
On October 17, 1997 the Company signed a letter of intent to purchase 50% of the
shares of Common Stock of a privately held corporation engaged in a
complementary field of business. $50,000 in cash and 200,000 shares of Common
Stock in the Company, held by Edward J. Guinan III, the Chairman of the Board of
Directors were placed as a deposit. This deposit became the property of the
Principals in the corporation as of January 15, 1998. The Letter of Intent
provides for a purchase price of $3,750,000 in cash plus $500,000 in
unrestricted shares of Common Stock of the Company, the value of the shares of
Common Stock being that as of the day of closing of the purchase. If the closing
does not occur on or prior to March 31, 1998, the deposit is subject to
forfeiture to the seller.
On January 9, 1998, the Company entered into an agreement in principle, subject
to confirmation by contract, to purchase 85% of the share capital of Network
America Inc., of Dallas, Texas. The consideration consists of a cash deposit of
$50,000 to the Principals, the redemption by the Company on January 19, 1998 an
outstanding Promissory Note in an amount of $103,000 held by an unrelated third
party, an undertaking by the Company to pay a sum of $250,000 in cash to the
Principals on March 31, 1998, and an undertaking by the Company to pay a sum of
$1,000,000 in eighteen subsequent equal monthly instalments of $55,555 each.
Inflation and Seasonality
The Company does not believe that its operations will be influenced by inflation
in the foreseeable future. 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.
15
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TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARY
- --------------------------------------------------------------------------------
Part II: OTHER INFORMATION
Items 1, 3, 4 and 5
Items 1, 3, 4 and 5 of Part II are either not applicable or are answered in the
negative and are omitted pursuant to the instructions to Part II.
16
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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 ASIA PACIFIC, INC.
By /s/ Paul L. Harrison
-----------------------------------------
Paul L. Harrison
President and Principal Financial Officer
January 15, 1999
17
