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 MARCH 31, 1999
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 / /
9,415,030 shares of Common Stock were issued and outstanding as of April 5,
1999.
<PAGE>
Trinitech Systems, Inc.
FORM 10-Q
For the quarterly period ended March 31, 1999
CONTENTS PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheets at March 31, 1999
(unaudited) and December 31, 1998 3
Condensed consolidated statements of operations (unaudited)
for the three months ended March 31, 1999 and 1998 4
Condensed consolidated statements of cash flows (unaudited)
for the three months ended March 31, 1999 and 1998 5
Notes to condensed consolidated financial statements
(unaudited) 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION 16
2
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TRINITECH SYSTEMS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1999 1998
- ------ ---- ----
(Unaudited) (a)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 2,420,765 $ 3,948,004
Accounts receivable - less allowance of $99,797 and $92,986, respectively 4,556,283 3,417,418
Inventories, net 1,416,813 1,279,302
Prepaid expenses and other current assets 372,294 283,912
Receivable from officers 122,302 120,583
------------ ------------
Total Current Assets 8,888,457 9,049,219
EQUIPMENT, net of accumulated depreciation of $1,685,405 and
$1,453,882, respectively
3,816,916 2,854,131
OTHER ASSETS 1,171,333 1,094,169
------------ ------------
TOTAL $ 13,876,706 $ 12,997,519
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,378,652 $ 873,817
Accrued expenses 688,163 635,943
Advance billings 1,652,675 1,489,057
Payroll and other taxes payable 171,606 79,953
------------ ------------
Total Current Liabilities 3,891,096 3,078,770
LONG TERM DEBT 1,800,000 1,800,000
------------ ------------
Total Liabilities 5,691,096 4,878,770
------------ ------------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY:
10% Convertible preferred stock - par value $1.00;
1,000,000 shares authorized; -0- issued and outstanding -- --
Common stock - par value $.001; 15,000,000 authorized; 9,415,030
and 9,408,530 shares issued and outstanding, respectively 9,415 9,409
Warrants 139,094 125,513
Additional paid-in capital 14,795,835 14,767,116
Accumulated deficit (6,300,187) (6,330,364)
Due from officers (458,547) (452,925)
------------ ------------
Total Stockholders' Equity 8,185,610 8,118,749
------------ ------------
TOTAL $ 13,876,706 $ 12,997,519
============ ============
</TABLE>
(a) The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date.
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
3
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TRINITECH SYSTEMS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
March 31, March 31,
1999 1998
------------ -------------
REVENUES:
<S> <C> <C>
Sales $ 833,239 $ 408,801
Subscription Revenue 1,150,572 332,458
Service Contracts 421,351 299,017
------------ -------------
Total Revenues 2,405,162 1,040,276
COST OF RECURRING CONTRACTS and SALES 662,891 463,314
------------ -------------
GROSS PROFIT 1,742,271 576,962
------------ -------------
EXPENSES:
Selling, general and administrative 1,566,874 1,458,524
Depreciation 128,612 80,881
Amortization 4,853 4,595
------------ -------------
Total Expenses 1,700,339 1,544,000
------------ -------------
EARNINGS (LOSS) FROM OPERATIONS 41,932 (967,038)
OTHER (EXPENSE) INCOME - NET (11,755) 26,038
------------ -------------
NET EARNINGS (LOSS) $ 30,177 $ (941,000)
BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE $ 0.00 $ (0.11)
============ =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 9,410,030 8,594,030
============ =============
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
4
<PAGE>
TRINITECH SYSTEMS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
March 31, March 31,
1999 1998
----------- -----------
<S> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES $ (141,154) $ (900,546)
INVESTING ACTIVITIES:
Payments for equipment, net of retirements (1,194,680) (348,689)
Payments for other assets (214,508) (231,917)
----------- -----------
Net cash used in investing activities (1,409,188) (580,606)
----------- -----------
FINANCING ACTIVITIES:
Repayment of borrowings -- (12,887)
Issuance of common stock 23,103 464,875
----------- -----------
Net cash provided by financing activities 23,103 451,988
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (1,527,239) (1,029,164)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,948,004 2,141,307
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,420,765 $ 1,112,143
=========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
5
<PAGE>
TRINITECH SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q. In the opinion of management, all
adjustments, which comprise normal and recurring accruals considered
necessary for a fair presentation, have been included. Operating
results for the three-month period ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1999. For further information, refer to the
consolidated financial statements and footnotes thereto included in
the Company's annual report on Form 10-KSB for the year ended
December 31, 1998.
2. PER SHARE INFORMATION
The Company's basic EPS is calculated based on net earnings
available to common shareholders and the weighted-average number of
shares outstanding during the reported period. Diluted EPS includes
additional dilution from common stock equivalents, such as stock
issuable pursuant to the exercise of stock options and stock
warrants.
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
----------- ---------------
<S> <C> <C>
Net Earnings (Loss) $30,177 $(941,000)
=========== ===============
Basic Weighted Average Shares Outstanding 9,410,030 8,594,030
Dilutive Options 246,709 -
Dilutive Warrants 73,981 -
----------- ---------------
Dilutive Weighted Average Shares Outstanding 9,730,720 8,594,030
========== ===============
Dilutive Earnings per Common Share $0.00 $(0.11)
=========== ===============
</TABLE>
Stock options and warrants were excluded from the earnings per share
calculation for the three month period ended March 31, 1998 since
the amounts would be anti-dilutive.
6
<PAGE>
3. INCOME TAXES
The Company's first quarter tax provision has been offset through
the utilization of net operating loss carryforwards.
4. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market. Inventories consisted of the following:
March 31, December 31,
1999 1998
Parts $ 960,940 $ 823,429
Finished goods 537,873 537,873
Less: allowance for obsolescence 82,000 82,000
---------- -----------
Total $1,416,813 $ 1,279,302
========== ===========
5. IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This
statement establishes standards for the accounting and reporting for
derivative instruments and for hedging activities and requires the
recognition of all derivatives as assets or liabilities measured at
their fair value. Gains or losses resulting from changes in the fair
value of derivatives would be recognized in earnings in the period
of change unless certain hedging criteria are met. The Company does
not expect the Statement to have a material impact on the
consolidated financial statements. SFAS No. 133 is effective for
fiscal years beginning after June 15, 1999.
7
<PAGE>
6. BUSINESS SEGMENT INFORMATION
In 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131
requires that segment data be disclosed based on how management
makes decisions about allocating resources to segments and measuring
their performance.
The Company has two principal business groups: Equities and Futures
& Options. The Equities Group operates primarily out of Stamford/New
York offices, while the Futures & Options Group operate primarily
out of the London and Chicago offices. However, each office has the
opportunity to sell all of the Company's products. The Company views
each office as its own business segment and measures its performance
based on the revenues of each location. The Company makes decisions
on each segment based on gross profit.
Information on reportable segments is as follows (in 000's)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------
March 31, 1999 March 31, 1998
--------------------- ---------------------
Revenues:
<S> <C> <C>
Stamford/New York $1,677 $ 621
London 725 405
Chicago 3 14
Inter-Segment Sales - 6
Inter-Segment Elimination - (6)
=========== =======
Total Revenues $2,405 $1,040
=========== =======
Gross Profit:
Stamford/New York $1,058 $188
London 683 380
Chicago 1 9
=========== =======
Gross Profit $1,742 $577
=========== =======
</TABLE>
7. STOCK OPTION PLAN
On March 30, 1999, the Board of Directors formally approved the
second amendment to the Amended and Restated 1991 Incentive and
Nonqualified Stock Option Plan. Under this amendment, the number of
options reserved for issuance has been increased from 1,500,000
shares to 2,500,000 shares of common stock. This amendment is
subject to approval at the Company's Annual Meeting of Shareholders,
which will be held on June 7, 1999.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and notes thereto. Historical results and
percentage relationships are not necessarily indicative of the operating results
for any future period.
The Company commenced its present business operations in January 1991 through
the acquisition of a software license for its Guided-Input(R) Touchpad system.
Since that time, the Company has transitioned from a hardware vendor to a
software development company focusing exclusively on applications for the
financial marketplace. The Company provides a complete line of workstation
products for the financial trading desk environment and its systems provide
order management and routing software for firms engaged in financial trading.
The Company currently offers its trading products (integrated systems including
hardware and software) together with linkage through its NYFIX data center. The
data center is a communication infrastructure enabling the Company to provide
its customers with global electronic connectivity for order routing and allows
Trinitech to deploy and monitor its systems and services from a single location.
Customers subscribe to various products, paying a monthly fee per terminal for
the Company's integrated software systems. Most contracts provide the customer
with a basic system or infrastructure, via the Company's NYFIX data center and
are entered into by the customer with the intention to expand the level of
services subscribed to, once the basic system and infrastructure are
operational. Subscription revenue contracts range from one to three year
periods. The Company begins recording subscription revenue once installation is
complete. In addition to significant logistical improvements in delivery and
support of its products, the Company expanded its business to offer the industry
a central electronic meeting place between the buy-side and sell-side, while
simultaneously providing a single point of universal access to different
exchange floor environments.
Management has made a considerable effort with respect to an expansion of its
operations, development of various trading systems and changes to its business
model to that of a subscription-based product offering. The Company believes
this expansion of personnel, facilities, product portfolio and
subscription-based model will continue to benefit the Company and its future
growth. In the previous model, the Company would only receive revenue one time
for products or services sold. It is important to note that this transition is
causing revenue to be recognized over a longer period of time than the previous
capital sales model. Management believes our subscription business model has
strengthened the Company's market share as well as its financial position going
forward.
REVENUES
Overall revenue exceeded 1998 numbers by 131% from $1,040,276 to $2,405,162.
Subscription revenue showed the most improvement by increasing 246% year over
year. Capital sales also showed improvement with a year over year increase of
104% primarily as a result of strong demand for the Company's Order Book
Management System ("OBMS") Futures and Options products. With the increase of
sales and subscription revenue, service revenue has shown a modest increase of
41% year over year. Revenue from export sales approximated $9,600 (less than 1%
of revenue) during the three months ended March 31, 1999 as compared to
approximately $8,000 (less than 1% of revenue) during the comparable period in
1998.
9
<PAGE>
Total revenue for the Stamford/New York location increased by approximately 170%
for the three month period ended March 31, 1999 as compared to the three month
period ended March 31, 1998. The increase was primarily due to higher levels of
software sales and subscription revenue with a related increase in service
revenue, partially offset by a decrease in hardware sales. Total revenue for the
London location increased by approximately 79% for the three month period ended
March 31, 1999 as compared to the three month period ended March 31, 1998. This
increase also reflects higher levels of software sales, subscription and service
revenue. The Chicago location experienced a decrease in total revenue of
approximately 79% for the three month period ended March 31, 1999 as compared to
the three month period ended March 31, 1998. This was principally due to a
decrease in hardware sales.
COST OF SALES AND SERVICE AND GROSS PROFIT
The Company's cost of recurring contracts and sales are principally comprised of
labor, materials, overhead, subscription communication lines, amortization of
capitalized product enhancement costs and depreciation of subscription-based
equipment. Gross profit, as a percentage of total revenue was approximately 72%
and 55% during 1999 and 1998, respectively. The increase in gross profit
percentage experienced by the Company during the three months ended March 31,
1999 principally resulted from the change in product mix. The Company obtains
its materials and supplies from a variety of vendors in the US and Far East.
During the three months ended March 31, 1999, the Company did not experience any
significant price increases in its component parts purchased. Included in cost
of sales is amortization expense for product enhancement costs of approximately
$132,500 and $96,000 for 1999 and 1998, respectively. Also included in cost of
sales is depreciation expense for subscription based equipment of approximately
$103,300 and $55,000 for 1999 and 1998, respectively.
SELLING, GENERAL AND ADMINISTRATIVE
During the three months ended March 31, 1999, selling, general and
administrative expenses increased marginally by 7% (from $1,458,524 to
$1,566,874) when compared to 1998. Despite the small increase the Company is
continuing its expansion of the development teams both in the U.S. and in
London. The expansion in development efforts relates to the Company's plans of
providing an increased number of product enhancements as well as new additional
services. As a result, the Company experienced increases in salaries and related
personnel costs, travel expenses and various office expenses. The Company's
recruitment effort continues to strengthen the Company's infrastructure and
position the Company to respond to increasing market and revenue opportunities.
Management believes that the continued investment in development of the NYFIX
data center, and its services, are designed to better leverage the existing
products together with providing additional sources of revenue. The Company has
continued its marketing programs in 1999 primarily focusing on representation at
technological exhibitions planned throughout the year. The Company will continue
to expand these programs throughout 1999. Research and development (new
explorative research) expenses for the three months ended March 31, 1999 and
1998 were approximately $127,500 and $168,600, respectively, (a decrease of
approximately 24%) and are included in selling, general and administrative
expenses. The decrease resulted from the continuation of the Company's strategy,
incorporated during 1998, to balance resources between research and development
and product enhancements, which strengthens our existing product lines.
10
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DEPRECIATION
Depreciation expense increased by approximately 59% for the three months ended
March 31, 1999 over the comparable 1998 period (from $80,881 to $128,612). Such
increases principally reflect the continued investment in the Company's
infrastructure in its state-of-the- art NYFIX data center on Wall Street.
OTHER (EXPENSE) INCOME
Financing and interest expense increased in the first three months of 1999
principally because of higher balances outstanding on the Company's new line of
credit and the cost of warrants issued to a non-employee for the guarantee of
the amounts outstanding under the credit facility.
Other income consists of interest income earned on cash balances and notes
receivable. Interest income in 1999 and 1998 approximated $38,000 and $26,000,
respectively. The 46% increase in interest income was principally because of
higher average cash balances maintained by the Company during the three months
ended March 31, 1999 versus the comparable period in 1998.
NET EARNINGS (LOSS)
Net earnings for the three months ended March 31, 1999 was $30,177 ($0.00 per
basic and diluted common share) compared to a net loss of $941,000 ($(0.11) per
basic and diluted common share) for 1998. The net earnings principally resulted
from the higher level of revenue as previously stated.
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 1999 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 has
positioned the Company to facilitate its future growth.
The Company's first quarter tax provision has been offset through the
utilization of net operating loss carryforwards.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity has been equity capital and drawdowns
from its line of credit. Since the commencement of operations, the Company has
raised approximately $13.3 million of working capital through various private
placements of its securities. At March 31, 1999, cash balances decreased to
$2,420,765 from $3,948,004 at December 31, 1998 as a result of the Company's
working capital needs and continued desire to strengthen its NYFIX and
subscription infrastructure.
The Company's current assets at March 31, 1999 exceeded its current liabilities
by approximately $5.0 million. The Company at March 31, 1999 had long-term debt
totaling $1,800,000, which represents amounts drawn down from its line of
credit. See discussion below. In addition, at March 31, 1999, the Company had no
material commitments for capital expenditures or inventory purchases.
On July 13, 1998, the Company entered into a three year $3 million line of
credit agreement (the "Agreement") with a financial institution with advances on
such agreement available to the Company during the first 18 months. The
Agreement is primarily intended to finance existing and future equipment
expenditures. The Agreement bears interest at either LIBOR plus 1.25% or the
Bank's Prime rate. The rate used is management's discretion. The Company drew
down an aggregate of $1,800,000 under the agreement during 1998 ($1 million at
the nine month LIBOR rate plus 1.25% (7%), $500,000 at the 30 day LIBOR rate
plus 1.25% (6.78%) and $300,000 at the Bank's Prime rate (8%)). The Agreement
requires monthly payments of interest only until January 30, 2000. Principal
drawdowns under the Agreement can not be prepaid in the first eighteen months.
Repayment of principal commences on July 30, 2000 with twelve monthly
installments of $83,333 with the remaining balance due on July 30, 2001. A
Company shareholder and the Company's president personally secure the debt. In
consideration for securing the Agreement, the said shareholder and president
received 150,000 and 25,000 warrants respectively, to purchase the Company's
common stock at $6.375 per share, which was the market value of the Company's
common stock on the date such warrants were issued. Expense related to the
warrants issued to the non-employee shareholder will be recognized over the
three-year term of the Agreement.
In association with obtaining the $3 million line of credit facility, the
Company terminated its previous $500,000 line of credit agreement (revised from
$1 million line of credit agreement in June 1998) and repaid all outstanding
term loans.
The Company believes that with its available capital, including the proceeds
from the November 1998 private placement, the line of credit facility and
anticipated funds generated from operations it will be able to fund its cash
needs through the end of 1999 without the need for additional capital or
financing. The Company intends to utilize its projected 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 grow more
rapidly than anticipated and do not generate cash to the extent currently
anticipated by management of the Company, it is possible that the Company could
require additional funds beyond 1999. At this
12
<PAGE>
time, the Company does not know what sources, if any, would be available to it
for such funds, if required.
In addition, the Company has warrants outstanding for the purchase of 325,837
shares of its Common Stock. Assuming the exercise of all such outstanding
Warrants, the Company would receive approximately $1,765,000 in gross proceeds.
WORKING CAPITAL
At March 31, 1999 and 1998 the Company had working capital of approximately
$4,997,000 and $5,970,000, respectively. The Company's present capital resources
include proceeds from its November 1998 private placement of Common Stock and
drawdowns from its bank credit facility.
CASH USED IN OPERATING ACTIVITIES
During the three months ended March 31, 1999, net cash used in operations was
approximately $141,000 as compared to cash used in operations for the three
months ended March 31, 1998 of approximately $901,000.
CASH USED IN INVESTING ACTIVITIES
During the three months ended March 31, 1999 and 1998, net cash used in
investing activities was approximately $1,409,000 and $581,000, respectively,
and principally represents payments for the purchases of equipment related to
the Company's data center and subscription equipment and payments related to
product enhancement costs for the Company's product portfolio.
PROCEEDS FROM FINANCING ACTIVITIES
During the three months ended March 31, 1999 and 1998, proceeds from financing
activities were approximately $23,000 and $452,000, respectively. The decrease
is primarily attributable to a decrease in the number of Common Stock options
and warrants exercised during the three month period ended March 31, 1999.
During that period 6,500 options were exercised as compared to 106,500 options
and 32,500 warrants for the three month period ended March 31, 1998.
YEAR 2000 COMPLIANCE
OVERVIEW. The Company is aware of industry wide issues related to Year 2000 that
are associated with the programming code in computer systems. Systems that do
not properly recognize the Year 2000 could generate erroneous data or cause a
system to fail. The Company has developed a Year 2000 plan for our customers as
well as for our internal needs, consisting of several phases which include risk
assessment, manual and automated review of programming code, baseline testing,
unit testing, integrated testing and a review of third party products.
CUSTOMERS. The Company participated in industry wide Year 2000 testing between
March through April of 1999. The objective of these tests was to ensure our
customer base is in full Year 2000 compliance before the end of the year. All of
these tests were successful. To date, the Company has already issued Year 2000
enhancements to our customers. The Company does not envision that these industry
wide tests will reveal any significant software errors. However, should there be
unforeseen problems, the Company has established a Year 2000 Quality Assurance
Team that will stay in place well into the Year 2000.
13
<PAGE>
The Company estimates that the most likely worst case scenario would be a
failure of exchange and utility systems caused by an unforeseen Year 2000
complication. Such a condition could affect our ability and the ability of
brokerage houses and other service providers to submit order executions
electronically.
Trinitech Systems can not assure that third-party utilities and service
providers will be in a position to address an unforeseen concern in a timely
basis. Failure of a third party to correct an issue could result in significant
loss of revenue, cause business disruption, a loss of customers, and could
materially affect our financial condition.
Were this contingency to arise, our application programs would automatically
alert our customers that the exchange or utility has not successfully
acknowledged their orders. All of the exchanges and utilities have a documented
process for reporting technical concerns and events. The Company is well versed
in following the procedures established for reporting technical trouble. The
Company would inform our customers to call in their orders via phone directly to
the exchange.
However, at the time of this report and after extensive testing with exchanges
and utilities, the Company has not identified any Year 2000 compliance problem
relating to our systems that would harm our business operations or financial
condition.
It is possible that a significant amount of litigation will arise out of Year
2000 compliance issues. The Company has established a workable plan and Quality
Assurance team to help minimize these risks. Because of the unprecedented nature
of such litigation, it is uncertain whether such issues may affect the Company.
Therefore, there can be no assurances that the Company will not experience
serious unanticipated negative consequences and/or material costs caused by
undetected errors or defects in the technology used in the Company's internal
systems or in third party systems that the Company employs.
INTERNAL NEEDS. The Company has been identifying and evaluating internal
software and hardware systems for Year 2000 compliance. The Company's internal
plan allows vendors of such systems to be contacted to document compliance and
at the time of this filing, is performing appropriate testing of systems
identified by our Year 2000 Quality Assurance Team.
The Company is also evaluating Year 2000 compliance of third parties that
provide services to the Company, such as banking and payroll processing.
Non-information technology systems will also be subjected to evaluation
including building support systems provided by the lessors of our offices and
our telecommunications systems.
The costs incurred to date have principally been the payroll related costs
associated with the time spent by our personnel in identifying, evaluating and
testing systems and products. To date, the Company has not identified any
systems that would require significant expenditures to become Year 2000
compliant nor is the Company aware of any significant costs that would be
incurred as a result of ensuring the internal needs are Year 2000 compliant.
14
<PAGE>
SEASONALITY
The Company believes that its operations are not significantly effected by
seasonality.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
establishes standards for the accounting and reporting for derivative
instruments and for hedging activities and requires the recognition of all
derivatives as assets or liabilities measured at their fair value. Gains or
losses resulting from changes in the fair value of derivatives would be
recognized in earnings in the period of change unless certain hedging criteria
are met. We do not expect the Statement to have a material impact on our
consolidated financial statements. The statement is effective for fiscal years
beginning after June 15, 1999.
15
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PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable
Item 5. OTHER INFORMATION
Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
27 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange Commission
for information purposes only and not filed.
(b) REPORTS ON FORM 8-K
None
16
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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.
Trinitech Systems, Inc.
(Registrant)
By: /s/ Richard A. Castillo
-----------------------------------------
Richard A. Castillo
Chief Financial Officer and Secretary
(Principal Financial and Accounting
Officer)
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,420,765
<SECURITIES> 0
<RECEIVABLES> 4,656,080
<ALLOWANCES> 99,797
<INVENTORY> 1,416,813
<CURRENT-ASSETS> 8,888,457
<PP&E> 5,502,321
<DEPRECIATION> 1,685,405
<TOTAL-ASSETS> 13,876,706
<CURRENT-LIABILITIES> 3,891,096
<BONDS> 0
0
0
<COMMON> 9,415
<OTHER-SE> 8,176,195
<TOTAL-LIABILITY-AND-EQUITY> 13,876,706
<SALES> 833,239
<TOTAL-REVENUES> 2,405,162
<CGS> 662,891
<TOTAL-COSTS> 2,363,230
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,785
<INCOME-PRETAX> 30,177
<INCOME-TAX> 0
<INCOME-CONTINUING> 30,177
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,177
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
