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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark one)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________to________
COMMISSION FILE NO. 0-21324
TRINITECH SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 06-1344888
(State of incorporation) (I.R.S. Employer identification number)
333 LUDLOW STREET, STAMFORD, CONNECTICUT 06902
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 425-8000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
8,224,530 shares of Common Stock were issued and outstanding as of August 8,
1996.
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
TRINITECH SYSTEMS, INC.
- --------------------------------------------------------------------------------
BALANCE SHEETS
- ---------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
ASSETS 1997 1996
---------------- --------------------
CURRENT ASSETS:
<S> <C> <C>
Cash $3,552,584 $1,198,730
Accounts receivable 2,510,979 3,802,364
Inventories 1,383,308 1,154,187
Prepaid expenses and other 313,178 315,911
---------------- --------------------
Total Current Assets 7,760,049 6,471,192
---------------- --------------------
EQUIPMENT - net of accumulated depreciation of $513,606
and $417,087 at June 30 and December 31, respectively 591,829 434,638
---------------- --------------------
OTHER ASSETS - net of accumulated amortization of $803,458
and $832,652 at June 30 and December 31, respectively 606,446 617,506
---------------- --------------------
TOTAL $8,958,324 $7,523,336
================ ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $646,674 $1,386,306
Accrued expenses 305,942 525,653
Current portion of term loans payable 51,423 25,994
Credit line payable - 745,000
Advance billings 241,030 149,675
Payroll and other taxes payable 34,482 65,808
---------------- --------------------
Total Current Liabilities 1,279,551 2,898,436
TERM LOANS PAYABLE 67,740 31,065
---------------- --------------------
Total Liabilities 1,347,291 2,929,501
---------------- --------------------
COMMITMENTS:
STOCKHOLDERS' EQUITY:
10% Convertible preferred stock - par value $1.00; 1,000,000
shares authorized; -0- outstanding - -
Common stock - par value $.001; 15,000,000 shares authorized
8,194,530 and 7,375,030 shares issued and outstanding
in 1997 and 1996, respectively 8,195 7,375
Additional paid-in capital 9,653,531 6,088,975
Accumulated deficit (2,050,693) (1,502,515)
---------------- --------------------
Total Stockholders' Equity 7,611,033 4,593,835
---------------- --------------------
TOTAL $8,958,324 $7,523,336
================ ====================
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
TRINITECH SYSTEMS, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (Unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
--- Three Months Ended --- --- Six Months Ended ---
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
-------------- -------------------- ------------------- --------------------
REVENUES:
<S> <C> <C> <C> <C>
Sales $ 865,233 $1,788,648 $2,441,277 $2,222,650
Service contracts 275,312 180,219 508,845 349,313
-------------- -------------------- ------------------- --------------------
Total Revenues 1,140,545 1,968,867 2,950,122 2,571,963
-------------- -------------------- ------------------- --------------------
COST OF SALES AND SERVICE:
Parts and materials 186,636 1,057,921 802,985 1,241,150
Labor, overhead and other costs 223,128 159,328 438,210 295,787
-------------- -------------------- ------------------- --------------------
Total Cost of Sales and Service 409,764 1,217,249 1,241,195 1,536,937
-------------- -------------------- ------------------- --------------------
GROSS PROFIT 730,781 751,618 1,708,927 1,035,026
-------------- -------------------- ------------------- --------------------
EXPENSES:
Selling, general and administrative 1,193,871 708,646 2,235,035 1,353,995
Depreciation and amortization 51,212 38,347 98,586 76,214
-------------- -------------------- ------------------- --------------------
Total Expenses 1,245,083 746,993 2,333,621 1,430,209
-------------- -------------------- ------------------- --------------------
INCOME (LOSS) FROM OPERATIONS (514,302) 4,625 (624,694) (395,183)
OTHER INCOME - NET 51,523 19,529 76,516 37,059
-------------- -------------------- ------------------- --------------------
NET INCOME (LOSS) ($462,779) $24,154 ($548,178) ($358,124)
============== ==================== =================== ====================
NET INCOME (LOSS)
PER COMMON SHARE $( 0.06) $ 0.00 $( 0.07) $( 0.05)
============== ==================== =================== ====================
AVERAGE COMMON SHARES
OUTSTANDING 8,187,500 7,295,300 7,890,900 7,284,700
============== ==================== =================== ====================
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
TRINITECH SYSTEMS, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS (Unaudited)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
---Six Months Ended ---
June 30, June 30,
1997 1996
----------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ($548,178) ($358,124)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 268,370 222,211
Changes in assets and liabilities:
Accounts receivable 1,291,385 453,242
Inventories (229,121) (182,041)
Prepaid expenses 2,733 (92,816)
Accounts payable - trade (739,632) 397,118
Deferred revenue 91,355 1,171
Payroll and other taxes payable (31,326) (8,734)
Accrued expenses (219,711) (291,162)
--------------- --------------------
Net cash (used for) provided by operating activities (114,125) 140,865
--------------- --------------------
INVESTING ACTIVITIES:
Payments for equipment (253,710) (48,034)
Payments for other assets (160,791) (177,193)
--------------- --------------------
Net cash used in investing activities (414,501) (225,227)
--------------- --------------------
FINANCING ACTIVITIES:
Issuance of common stock 3,565,376 73,620
Repayment of borrowings (682,896) (8,334)
--------------- --------------------
Net cash provided by financing activities 2,882,480 65,286
--------------- --------------------
INCREASE (DECREASE) IN CASH 2,353,854 (19,076)
CASH, BEGINNING OF PERIOD 1,198,730 1,258,119
--------------- --------------------
CASH, END OF PERIOD $3,552,584 $1,239,043
=============== ====================
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
TRINITECH SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared by the
Company without audit (except for the balance sheet information as
of December 31, 1996 which has been derived from the Company's
audited financial statements) in accordance with generally accepted
accounting principles for interim financial information and
instructions to Form 10-QSB and Item 310 (b) of Regulation S-B. In
the opinion of management, all adjustments (consisting of only
normal recurring accruals) considered necessary for a fair
presentation have been included.
The accompanying financial statements do not include certain
footnotes and financial presentations normally required under
generally accepted accounting principles and, therefore, should be
read in conjunction with the Company's 1996 audited financial
statements. Results of operations for the period ended June 30, 1997
are not necessarily indicative of operating results for the fiscal
year.
2. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market. Inventories consisted of the following:
June 30, 1997 December 31, 1996
Parts $ 965,299 $ 750,722
Finished goods 418,009 403,465
---------- ----------
Total $1,383,308 $1,154,187
========== ==========
3. PER SHARE INFORMATION
Net loss per common share is based on the weighted average number of
common shares outstanding. Common stock equivalents have not been
included in the per share calculation because their effect is
anti-dilutive. In February of 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standard
No. 128, "Earnings Per Share". The Company will adopt this standard,
as required, at the end of this year. Had this standard been adopted
at the beginning of 1997, for the three and six month periods ended
June 30, 1997 the Company would have reported basic loss per share
of $0.06 and $0.07, respectively.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company commenced its present business operations in January
1991 through the acquisition of a software license for its Guided-Input(R)
Trinitech TouchPad(R) System. The following discussion should be read in
conjunction with the consolidated financial statements and related notes
included elsewhere herein. Certain statements included in this report,
including, but not limited to, statements in this Management's Discussion and
Analysis of Financial Condition and Results of Operations, which are not
historical facts may be deemed to contain forward looking statements with
respect to events, the occurrence of which involves risks and uncertainties,
including, but not limited to, the Company's expectations regarding net sales,
gross profit, operating income (loss) and financial condition.
REVENUES
Revenues for the three and six months ended June 30, 1997 were
$1,140,545 and $2,950,122 as compared to $1,968,867 and $2,571,963 in the
comparable periods in 1996. The decrease in revenues during the three month
period ended June 30, 1997 over the comparable 1996 quarter principally resulted
from the Company beginning to change its revenue mix from traditional capital
equipment sales to subscription-based revenue. Subscription revenue contracts
are generally for an initial period of one year with one to three year renewal
periods, with annual revenues ranging from $15,000 to over $100,000, per
contract. During the three months ended June 30, 1997, capital equipment sales,
software and subscription revenue were approximately 52%, 43% and 5% of sales
revenues, respectively as compared to 85%, 15% and 0%, respectively during the
three months ended June 30, 1996. Although subscription-based revenue has the
short-term negative impact of reduced revenues in the early stage, management
believes that the change will have a long-term positive impact on the future
revenue growth of the Company. Management is of the opinion that this change
will result in additional new orders and increased market share that it
otherwise would not have had, as well as longer-term predictable revenues per
customer. The increase in revenues for the six month period ended June 30, 1997
over the comparable 1996 period was principally due to an increase in the
delivery of software systems, specifically for the Company's FIXtalk software
system, and increased deliveries of touch vending terminal products to a
non-financial service firm customer during the first quarter of 1997.
Approximately 43% and 39% of the Company's sales revenues for the three and six
month periods ended June 30, 1997 were derived from software licenses as
compared to approximately 15% and 16% during the comparable periods in 1996.
Revenue from export sales approximated $220,000 (25% of sales) and $1,441,000
(59% of sales) during the three and six months ended June 30, 1997 as compared
to $1,520,000 (85% of sales) and $1,593,000 (72% of sales) during the comparable
periods in 1996. In addition, revenues from service contracts increased by 53%
and 46% in the three and six month periods ended June 30, 1997 over the
comparable 1996 periods. The increase in service revenue resulted from increased
sales of hardware and software products during the past year. The Company did
not experience any significant price changes in its product lines during the
three and six month periods ended June 30, 1997 and 1996.
6
<PAGE>
COST OF SALES AND SERVICE AND GROSS PROFIT
The Company's cost of sales and service is principally comprised of
labor, materials, overhead and amortization of capitalized product enhancement
costs. Gross profit as a percentage of total revenues were 64.1% and 57.9% for
the three and six month periods ended June 30, 1997 as compared to 38.2% and
40.2% during the comparable periods in 1996. The increase in gross profit
percentage experienced by the Company during 1997 principally resulted from an
increase in the amount of higher margin software installations which was
partially offset by lower margins associated with the Company's touch vending
terminal products sold during the first quarter of 1997 and throughout 1996. The
Company obtains its materials and supplies from a variety of vendors in the US
and Far East. During the three and six months ended June 30, 1997, the Company
did not experience any significant price increases in its component parts
purchased.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses for the three and six
month periods ended June 30, 1997 were $1,193,871 and $2,235,035 as compared to
$708,646 and $1,353,995 in the comparable periods in 1996, an increase of 68.5%
and 65.1%, respectively. Such increases reflected the continued expansion of
operations in both the U.S and in London. As a result, the Company experienced
increases in salaries and related personnel costs, travel expenses, recruiting
fees and various office expenses. During the past two years, the Company added
personnel principally to its technical programming and sales staff and, during
the three months ended June 30, 1997, the Company added 11 new employees.
Employees added to technical positions have a primary focus on the customer
hardware and software project implementation and development. The Company's
recruitment effort, which began during 1993, continues to strengthen management
infrastructure in order to better position the Company to respond to present
customers needs as well as for the future. The Company, during the past several
years, has spent a considerable effort in developing a variety of trading
systems. Management believes that this development effort will enhance the
Company's product portfolio as its grows in the future. The Company has also
continued its marketing programs for 1997, primarily focusing on public
relations activities, production of various product brochures, and
representation at technological exhibitions planned throughout the year.
Research and development expenses for the three and six month periods ended June
30, 1997 approximated $79,000 and $141,000 as compared to $60,000 and $124,000
in the comparable periods in 1996 and are included in selling, general and
administrative expenses.
OTHER INCOME
Other income consists principally of interest earned on cash
balances and sublease income earned. Interest income for the three and six month
periods ended June 30, 1997 were approximately $48,300 and $63,500 as compared
to $9,800 and $17,700 in the comparable periods in 1996. The increase in other
income principally results from interest earned on higher cash balances
maintained by the Company during 1997. The Company previously leased a portion
of its corporate office facility under a three year sublease which expired on
April 30, 1997. Due to the continuing expansion of operations, (see "Selling,
General and Administrative" above) the Company has decided not to renew the
sublease and incorporated such space into its existing corporate facility.
Sublease rental income earned during the three and six month periods ended June
30, 1997 approximated $3,200 and $13,000 as compared to $9,700 and $19,400 in
the comparable 1996 periods.
7
<PAGE>
NET INCOME (LOSS)
Net loss for the three months ended June 30, 1997 was $462,779
($0.06 per share) as compared to a net income of $24,154 ($0.00 per share) in
the three months ended June 30, 1996. Net loss for the six months ended June 30,
1997 totaled $548,178 ($0.07 per share) as compared to a net loss of $358,124
($0.05 per share) in the six months ended June 30, 1996. This increase in net
loss, during the three and six month periods ended June 30, 1997, principally
resulted from 1) decrease in "capital sales" type revenue resulting from the
Company moving to a subscription-based revenue model which presently is in its
early stage of growth and 2) lower margins experienced on the sale of the
Company's touch vending terminal products sold during the first quarter of 1997.
See "Revenues" and "Cost of Sales and Service and Gross Profit" above.
Management has made a considerable effort with respect to an
expansion of its operations, development of various trading systems which began
in 1993 and continues into 1997 and changes to its business model to that of a
subscription-based product offering. The Company believes that this expansion of
personnel, facilities, product portfolio and subscription-based model will
better position the Company and facilitate its future growth. However, in spite
of its optimism, management is also cautioning that the Company's aggressive
conversion from a capital sales model to a subscription-based model is causing
revenue recognition from subscription-based orders to be realized over a longer
period of time than the previous capital sales model.
LIQUIDITY AND CAPITAL RESOURCES
Since its formation, the Company's primary source of working capital
has been private offerings of its securities, through which the Company has
raised approximately $9.6 million of working capital. At June 30, 1997, cash
balances increased to $3,552,584 from $1,198,730 at December 31, 1996.
The Company's current assets at June 30, 1997 exceeded its current
liabilities by approximately $6,480,000. The Company at June 30, 1997 had
long-term debt totaling approximately $67,700 which represents secured term
loans on the purchase of development equipment. In addition, at June 30, 1997,
the Company had no material commitments for capital expenditures or inventory
purchases. The Company had available a one million dollar bank line of credit
facility for the purpose of financing accounts receivable and, at June 30, 1997,
the Company had not used the line of credit facility. The line of credit,
secured by accounts receivable and inventory, expires on June 30, 1999. Interest
on the line of credit is based on the bank's prime rate plus one percent.
The Company believes that with its available capital, line of credit
facility and anticipated funds generated from operations, it will be able to
fund its cash needs through the end of 1997 without the need for additional
capital or financing. The Company intends to utilize its positive financial
position to internally finance its continuing research and development
activities and anticipated sales growth. The Company's financial requirements
and its ability to meet them thereafter will depend largely on its future
financial performance. However, in the event the Company's operations do not
generate cash to the extent currently anticipated by management of the Company
and grow more rapidly than anticipated, it is possible that the Company would
require additional funds beyond 1997. At this time, the Company does not know
what sources, if any, would be available to it for such funds, if required.
8
<PAGE>
In addition, at June 30, 1997, the Company has warrants outstanding
for the purchase of 541,337 shares of its Common stock at exercise prices
between $2.00 to $4.50. Assuming the exercise of all such outstanding Warrants,
the Company would realize approximately $1,530,000 in gross proceeds.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 14, 1997
TRINITECH SYSTEMS, INC.
(Registrant)
By: /s/ Peter Kilbinger Hansen
--------------------------
Peter Kilbinger Hansen
Chairman of the Board
and President
(Chief Executive Officer)
By: /s/ William E. Alvarez, Jr.
---------------------------
William E. Alvarez, Jr.
Chief Financial Officer and Secretary
(Principal Financial and Accounting
Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-QSB FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,552,584
<SECURITIES> 0
<RECEIVABLES> 2,510,979
<ALLOWANCES> 0
<INVENTORY> 1,383,308
<CURRENT-ASSETS> 7,760,049
<PP&E> 1,105,435
<DEPRECIATION> 513,606
<TOTAL-ASSETS> 8,958,324
<CURRENT-LIABILITIES> 1,279,551
<BONDS> 0
0
0
<COMMON> 8,195
<OTHER-SE> 9,653,531
<TOTAL-LIABILITY-AND-EQUITY> 8,958,324
<SALES> 2,441,277
<TOTAL-REVENUES> 2,950,122
<CGS> 1,241,195
<TOTAL-COSTS> 1,241,195
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (548,178)
<INCOME-TAX> 0
<INCOME-CONTINUING> (548,178)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (548,178)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
