SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- -----------
Exchange Act of 1934
For the quarterly period ended September 30, 1996 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 33-60296
Globalink, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 54-1473222
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9302 Lee Highway, 12th Floor, Fairfax, VA 22031
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (703) 273-5600
Not Applicable
(Former name, address and fiscal year, if changed since last report)
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
Registrant had 5,341,352 shares of common stock outstanding
as of September 30, 1996.
GLOBALINK, INC.
TABLE OF CONTENTS
Part I Financial Information: Page No.
Item 1. Financial Statements
Balance Sheets as of September 30, 1996,
and December 31, 1995 1
Statements of Operations for the Three
Months Ended September 30, 1996, and
September 30, 1995 2
Statements of Operations for the Nine
Months Ended September 30, 1996, and
September 30, 1995 3
Statements of Cash Flows for the Nine
Months Ended September 30, 1996, and
September 30, 1995 4
Notes to Interim Financial Statements 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9
Part II Other Information:
Item 6. Exhibits and Reports on Form 8-K 12
Item 1. Financial Statements
GLOBALINK, INC.
BALANCE SHEETS
September 30, December 31,
1996 1995
-------------- --------------
ASSETS (Unaudited) (Audited)
Current Assets:
Cash and cash equivalents $ 52,048 $ 819,846
Marketable securities 400,000 1,579,237
Accounts receivable, net of allowances of
$2,043,885 and $3,107,001 9,980,578 7,180,600
Inventories 711,257 585,350
Prepaid expenses and deposits 356,973 263,051
Other receivables 124,442 93,252
-------------- --------------
Total Current Assets 11,625,298 10,521,336
Equipment and Furniture, net of accumulated
depreciation of $709,631 and $441,349 917,620 979,534
Capitalized Software, net of accumulated
amortization of $4,518,165 and $4,079,950 854,513 951,324
-------------- --------------
Total Assets $ 13,397,431 $ 12,452,194
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable - trade $ 2,078,844 $ 1,793,705
Accrued and other liabilities 849,141 795,749
Current portion of notes payable 1,279,000 740,000
-------------- --------------
Total Current Liabilities 4,206,985 3,329,454
Long-Term Notes Payable 283,639 388,889
Deferred Rent 71,083 83,579
Stockholders' Equity:
Common stock, $.01 par value, 20,000,000 shares
authorized, 5,341,352 and 5,304,017 shares
issued and outstanding 53,414 53,040
Additional paid-in capital 17,408,731 17,246,384
Accumulated deficit (8,626,421) (8,649,152)
-------------- --------------
Total Stockholders' Equity 8,835,724 8,650,272
-------------- --------------
Total Liabilities and Stockholders' Equity $ 13,397,431 $ 12,452,194
============== ==============
<FN>
The accompanying notes are an integral part of these statements.
1
</FN>
GLOBALINK, INC.
STATEMENTS OF OPERATIONS
Three Months Ended
September 30,
1996 1995
-------------- --------------
(Unaudited) (Unaudited)
Product sales (net of returns and allowances) $ 3,650,517 $ 3,496,629
Translation service revenue 540,176 172,336
-------------- --------------
4,190,693 3,668,965
Costs and Expenses:
Cost of products sold 496,963 642,016
Amortization of capitalized software 184,073 44,130
Direct labor and fringes 287,642 108,959
Development 347,477 465,460
Selling, marketing and other 2,093,365 2,948,630
Administrative 864,187 749,096
-------------- --------------
4,273,707 4,958,291
-------------- --------------
Loss From Operations (83,014) (1,289,326)
Interest (expense) income, net (15,938) 16,802
-------------- --------------
Loss Before Income Taxes (98,952) (1,272,524)
Income tax expense 0 0
-------------- --------------
Net Loss $ (98,952) $ (1,272,524)
============== ==============
Loss per common share $ (0.02) $ (0.24)
============== ==============
Average number of common shares and common share
equivalents outstanding during the period 5,341,352 5,300,702
============== ==============
<FN>
The accompanying notes are an integral part of these statements.
2
</FN>
GLOBALINK, INC.
STATEMENTS OF OPERATIONS
Nine Months Ended
September 30,
1996 1995
-------------- --------------
(Unaudited) (Unaudited)
Product sales (net of returns and allowances) $ 10,925,914 $ 12,845,548
Translation service revenue 1,019,509 541,982
-------------- --------------
11,945,423 13,387,530
Costs and Expenses:
Cost of products sold 1,363,692 2,163,727
Amortization of capitalized software 438,215 286,950
Direct labor and fringes 546,223 322,076
Development 1,074,504 1,193,239
Selling, marketing and other 6,079,346 8,016,335
Administrative 2,405,155 2,173,522
-------------- --------------
11,907,135 14,155,849
-------------- --------------
Earnings (Loss) From Operations 38,288 (768,319)
Interest (expense) income, net (15,557) 100,729
-------------- --------------
Earnings (Loss) Before Income Taxes 22,731 (667,590)
Income tax expense 0 0
-------------- --------------
Net Earnings (Loss) $ 22,731 $ (667,590)
============== ==============
Earnings (loss) per common share $ 0.00 $ (0.13)
============== ==============
Average number of common shares and common share
equivalents outstanding during the period 5,340,876 5,289,591
============== ==============
<FN>
The accompanying notes are an integral part of these statements.
3
</FN>
GLOBALINK, INC.
STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
1996 1995
-------------- --------------
(Unaudited) (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Net earnings (loss) $ 22,731 $ (667,590)
Adjustments to reconcile net earnings (loss) to net cash
used in operating activities
Amortization of capitalized software 438,215 286,950
Depreciation 268,282 186,863
Change in Assets and Liabilities
Increase in accounts receivable (2,799,978) (964,533)
Increase in inventories (125,907) (63,547)
Increase in prepaid expenses and deposits (93,922) (109,328)
(Increase) decrease in other receivables (31,190) 16,160
Increase (decrease) in accounts payable 285,139 (435,617)
Increase in accrued and other liabilities 53,392 162,406
Decrease in deferred rent (12,496) (3,790)
-------------- --------------
Total Adjustments (2,018,465) (924,436)
-------------- --------------
Net cash used in operating activities (1,995,734) (1,592,026)
Cash flows from investing activities
Decrease in marketable securities 1,179,237 2,051,756
Increase in capitalized software (341,404) (292,348)
Capital expenditures for equipment and furniture (206,368) (460,997)
-------------- --------------
Net cash provided by investing activities 631,465 1,298,411
Cash flows from financing activities
Issuance of common stock 162,721 161,173
Proceeds from issuance of debt 433,750 858,889
-------------- --------------
Net cash provided by financing activities 596,471 1,020,062
-------------- --------------
Net (decrease) increase in cash (767,798) 726,447
Cash and cash equivalents at beginning of period 819,846 503,367
-------------- --------------
Cash and cash equivalents at end of period $ 52,048 $ 1,229,814
============== ==============
<FN>
The accompanying notes are an integral part of these statements.
4
</FN>
GLOBALINK, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE A -- Summary of Significant Accounting Policies
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles and with the instructions to Form
10-QSB. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting only of
normal recurring accruals) considered necessary for a fair presentation have
been included. The results of operations for the interim period ended September
30, 1996, are not necessarily indicative of the results to be expected for the
full year. For further information, refer to the financial statements and the
related footnotes included in the Company's audited financial statements for the
year ended December 31, 1995.
NOTE B -- Acquisition of MicroTac Software
On November 22, 1994, the stockholders of Globalink, Inc. (Globalink), and
MicroTac Software, Inc. (MicroTac), approved the acquisition of MicroTac by
Globalink (collectively referred to as the Company). The closing of the
acquisition was executed on December 22, 1994, in a business combination
accounted for as a pooling of interest. MicroTac, which developed and marketed
foreign language translation software, became a wholly-owned subsidiary of
Globalink through the exchange of 880,000 shares of Globalink's common stock for
all the outstanding stock of MicroTac. The accompanying financial statements
reflect the combined accounts of the companies for the periods presented, and
financial statements for prior periods have been restated to give effect to the
combination.
NOTE C -- Composition of Certain Financial Statement Captions
1. Cash and Cash Equivalents
The Company considers all highly liquid securities purchased with a maturity of
three months or less to be cash equivalents.
2. Marketable Securities
Marketable securities consist of U.S. Government debt securities which mature
within one year. The Company classifies debt securities as held-to-maturity.
Held-to-maturity securities are carried at amortized cost which equals estimated
fair value.
3. Inventories
Inventories consist of finished goods and work-in-process which are stated at
the lower of first-in, first-out (FIFO) cost or market.
4. Prepaid Expenses and Deposits
Prepaid expenses and deposits consist of prepaid advertising and brochures and
other prepaid amounts. The Company expenses the costs of first-time advertising
when the material is published. Prepaid advertising and brochures consist of
advertising costs paid in advance of publication. Also included in prepaid
advertising and brochures expense are the costs of developing various marketing
and product materials for new software. These costs are expensed when the
software is released.
5
NOTES TO INTERIM FINANCIAL STATEMENTS -- (Continued)
5. Equipment and Furniture
Equipment and furniture consist of office and other equipment and furniture and
fixtures. Depreciation is provided for in amounts sufficient to relate the cost
of depreciable assets to operations over their estimated service lives, ranging
from three to seven years. The straight-line method of depreciation is followed
for all assets for financial reporting purposes. Accelerated methods are used
for tax purposes.
6. Capitalized Software
The Company capitalizes certain initial software development costs and
enhancements thereto incurred after technological feasibility has been
demonstrated. To date, all products and enhancements thereto have utilized
proven technology. Such capitalized amounts are amortized commencing with
product introduction over the greater of the ratio of current gross revenue for
a product to the total expected gross revenue over the life of that product, or
the straight-line method over the remaining estimated economic life, ranging
from three to six years. The unamortized capitalized costs by product are
reduced to an amount not to exceed the future net realizable value by product at
each balance sheet date.
8. Accrued and Other Liabilities
Accrued and other liabilities consist of accrued salaries, commissions, payroll
taxes and fringe benefits, accrued royalties and other accrued liabilities.
NOTE D - Employment Agreements
The Company has entered into employment agreements with four of its employees.
The agreements are each for a three-year period commencing between March 1995
and June 1996 and will renew automatically for succeeding periods of 1 year
unless sooner terminated. In the event the Company terminates without cause the
employment of any of these employees, the employee shall receive an amount equal
to one year's base salary plus accrued benefits and incentive compensation. The
agreements contain a provision which triples certain amounts due in the event of
a hostile takeover. The agreements also contain provisions for the accelerated
vesting of options if certain defined changes to the composition of the Board of
Directors should occur.
Note E - Warrants and Stock Options
1. Warrants - Translator Associates
At December 31, 1994, the Company had outstanding warrants for a total of 5,247
shares of its common stock exclusively to Translator Associates Partners
exercisable at a price of $.32 per share. At the date of grant, the exercise
price approximated or was greater than the fair market value of the shares at
that time. The warrants became exercisable on December 29, 1989, and expire on
December 29, 1999. During 1995, the original warrants representing 5,247 shares
were exercised by Translator Associates. An additional 8,501 warrants were
issued and exercised at $5.25 per share by Translator Associates under certain
preemptive rights attached to the warrants. At December 31, 1995, there were no
outstanding warrants to Translator Associates.
2. Warrants - M.H. Meyerson and Company, Inc.
The Company had outstanding warrants to M.H. Meyerson for 50,000 units, each
unit consisting of two shares of common stock and one common stock purchase
option at $8.00 per share. At the date of grant, the exercise price approximated
or was greater than the fair market value of the shares at that time. The
warrants were exercisable at $12.00 per unit for a five-year period, commencing
in June 1994. The warrants and related options were exercised in June 1994 for a
total of $1,000,000.
6
NOTES TO INTERIM FINANCIAL STATEMENTS - (Continued)
3. Warrants - Other
The Company had outstanding 575,000 warrants to purchase one share of Common
Stock at $8.00 per share. At the date of grant, the exercise price approximated
or was greater than the fair market value of the shares at that time. The
warrants were redeemable by the Company for $.01 per warrant, upon thirty (30)
days prior written notice, provided the average closing bid price of the Common
Stock for ten (10) consecutive trading days ending not more than fifteen (15)
days prior to the date of the redemption notice was $9.00 or more per share. As
of March 1994, the average closing bid price of the Common Stock had been above
$9.00 for more than ten (10) trading days. Accordingly, in April 1994, the
Company exercised its right to call these warrants. The Company received
$4,597,920 less related expenses of $34,439 from the exercise of 574,740
warrants. The remaining 260 warrants were redeemed at $.01 per warrant.
4. Options - Other
At September 30, 1996, and December 31, 1995, the Company had outstanding
options to purchase 62,500 and 40,000 shares, respectively, of common stock to
individuals at exercise prices ranging from $6.50 to $10.00 per share. At the
date of grant, the exercise price approximated or was greater than the fair
market value of the shares at that time. The options have a term of 5 years.
5. Options - Officers and Directors
At September 30, 1996, and December 31, 1995, the Company had outstanding
options to purchase 569,000 and 416,000 shares, respectively, of common stock to
current and previous officers of the Company at exercise prices ranging from
$3.00 to $11.00 per share. At the date of grant, the exercise price approximated
or was greater than the fair market value of the shares at that time. The
options have a term of 5 years.
At September 30, 1996, and December 31, 1995, the Company had outstanding
options to purchase 40,000 shares of common stock to members of the Board of
Directors at an exercise price of $4.00 per share under the Company's 1992
Directors' Non-Qualified Stock Option Plan. At the date of grant, the exercise
price approximated or was greater than the fair market value of the shares at
that time. The options expire in December 1997.
At September 30, 1996, and December 31, 1995, the Company had outstanding
options to purchase 140,000 and 40,000 shares, respectively, of common stock to
members of the Board of Directors at exercise prices ranging from $6.00 to $9.18
per share. At the date of grant, the exercise price approximated or was greater
than the fair market value of the shares at that time. The options have a term
of 5 years.
6. Options - Employees
At September 30, 1996, and December 31, 1995, the Company had outstanding
options to purchase 275,350 and 270,800 shares of common stock, respectively, to
certain employees of the Company at exercise prices ranging from $6.38 to $14.88
per share. At the date of grant, the exercise price approximated or was greater
than the fair market value of the shares at that time. The options have a term
of 5 years.
7
NOTES TO INTERIM FINANCIAL STATEMENTS - (Continued)
NOTE F - Export Sales
The Company sells software abroad through distributors, dealers and mail orders.
During the nine months ended September 30, 1996, export sales to France and
Germany totaled $2,096,000 and $1,529,000, respectively, or approximately 18%
and 13% of total sales, respectively. During the corresponding period in 1995,
export sales to Germany totaled $1,748,000 or approximately 13% of total sales.
Total export sales for the nine months ended September 30, 1996 and 1995, were
approximately $6,427,000 and $6,034,000, respectively. Substantially all sales
are completed in U.S. Dollars. For those transactions completed in a foreign
currency, the company has taken foreign exchange hedging positions to prevent
any potential foreign currency exchange risk.
NOTE G - Concentration of Credit Risk
Due to the nature of the Company's business, sales to a few customers, primarily
software distributors, have accounted for a significant percentage of the
Company's sales. During the nine months ended September 30, 1996, three
customers accounted for 38% of total sales. During the corresponding period in
1995, one customer accounted for more than 14% of total sales. Accounts
receivable at September 30, 1996, and December 31, 1995, include approximately
$6,499,000 and $4,473,000, respectively, in amounts due from five customers.
Note H - Subsequent Event
In an October 1996 private placement the Company sold three Prepaid Warrants at
$500,000 each for a total consideration of $1,500,000. Each Prepaid Warrant is
convertible into common shares of the Company to be determined by dividing (x)
the exercise amount by (y) the lower of (1) the arithmetic average of the
closing price of the common stock on the five consecutive trading days
immediately preceding the exercise date or (2) the closing bid price on the
trading date prior to the closing date. The three Prepaid Warrants may be
converted on the ninetieth, one hundred twentieth and one hundred fiftieth day
following the closing date, respectively. The purchaser will also receive
additional warrants to purchase common shares equal to 10% of the number of
shares received upon conversion of the Prepaid Warrants. In connection with the
private placement, Tanner Unman Securities, Inc., the placement agent, received
warrants to purchase 20,000 common shares of the Company.
8
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The Registrant's net loss for the three months ended September 30, 1996, was
$99,000 compared to a net loss of $1,273,000 for the corresponding period in
1995. Revenues for the same three month period increased 14% to $4,191,000 from
$3,669,000. For the nine months ended September 30, 1996, the net income was
$23,000 compared to a net loss of $668,000 for the corresponding period in 1995.
Revenues for the same nine month period decreased 11% to $11,945,000 from
$13,388,000.
Product sales for the three months ended September 30, 1996, increased 4% to
$3,651,000 from $3,497,000 for the corresponding period in the prior year. For
the nine months ended September 30, 1996, product sales decreased 15% to
$10,926,000 from $12,846,000 for the corresponding period in the prior year. The
decrease is primarily due to the Company's increasing efforts to reduce
distributor inventory and align sell-through campaigns with sales of products
into the channels. The Company continues to open new distributor channels,
increase growth in the existing distributor channels and pursue additional OEM
opportunities. The Language Assistant Series Localized version and the Power
Translator and Language Assistant Series versions for Windows in CD-ROM media
have been the primary vehicle for sales to the Company's distributors and have
been well accepted. In addition, the Company introduced Web Translator and
Telegraph in March 1996 and Power Translator 6.0 in June 1996 which have also
been well accepted and contributed to sales during the period ended September
30, 1996.
International sales for the three months ended September 30, 1996, decreased 1%
to $1,915,000 from $1,934,000 for the corresponding period in 1995. For the nine
months ended September 30, 1996, international sales increased 6% to $6,427,000
from $6,034,000 for the corresponding period in 1995. The primary exports have
been to Europe, Canada, Mexico and Latin America. International sales have been
attributable to further development of the Company's network of international
distributors, along with additional OEM contracts entered into in Latin America
and Europe. The Company has also shifted its focus in Europe away from the
exclusive use of key major distributors towards smaller, more active, second
tier distributors who are better able to promote and sell its products into the
retail channel of their respective geographical locations.
Translation service revenue for the three months ended September 30, 1996,
increased 213% to $540,000 from $172,000 for the corresponding period in the
prior year. For the nine months ended September 30, 1996, translation service
revenue increased 88% to $1,020,000 from $542,000 for the corresponding period
in 1995. The increase resulted from increased revenue generating efforts by the
department's personnel who were previously concentrating on the translation of
localized versions of the Company's new products. In addition, the department
has increased its focus on obtaining larger jobs and establishing long term
projects with its customers.
Sales returns and allowances increased to $3,114,000 for the nine months ended
September 30, 1996, compared to $2,680,000 for the corresponding period in 1995.
The increase is attributable to the Company's continuing efforts to reduce
distributor inventory and align sell-through campaigns with sales of products
into the channels. Distribution agreements typically allow for the return of
certain merchandise to provide for stock balancing. The Company continuously
monitors these programs and makes appropriate accruals monthly to handle future
distribution stock balancing. The following table shows the gross product sales,
returns and net product sales for the periods indicated.
Nine months ended September 30,
1996 1995
--------------------------------------
Gross Product Sales $ 14,040,122 $ 15,525,774
Returns (3,114,208) (2,680,226)
--------------------------------------
Net Product Sales $ 10,925,914 $ 12,845,548
--------------------------------------
9
Cost of products sold for the three months ended September 30, 1996, decreased
22% to $497,000 from $642,000 for the corresponding period in the prior year.
For the nine months ended September 30, 1996, cost of products sold decreased
37% to $1,364,000 from $2,164,000 for the corresponding period in the prior
year. The decrease in cost of products sold was primarily due to decreased
product sales along with decreased cost of certain packaging components and a
shift in the mixture of products sold. This shift was both to the CD-ROM
editions of the Power Translator and the Language Assistant Series product lines
and additional OEM contracts which contribute higher margins along with a
decrease in the Language Computers which carried lower margins. Gross profit
margin was 88% for the three months ended September 30, 1996, compared to 83%
for the corresponding period in 1995. For the nine months ended September 30,
1996, gross profit margin was 89% compared to 84% for the corresponding period
in 1995. The increase in gross profit margin was directly attributable to the
decrease in cost of products sold.
Amortization of capitalized software for the three months ended September 30,
1996, increased 317% to $184,000 from $44,000 for the corresponding period in
the prior year. For the nine months ended September 30, 1996, amortization of
capitalized software increased 53% to $438,000 from $286,000 for the
corresponding period in the prior year. The increase is due to the release of
new products in 1996 for which previously capitalized development costs began to
be amortized.
Direct labor and fringes, which principally include charges for independent and
in-house translators within the translation services group, increased 164% for
the three months ended September 30, 1996, to $288,000 from $109,000 for the
corresponding period in 1995, as a result of the increased revenues for this
group. For the nine months ended September 30, 1996, direct labor and fringes
increased 70% to $546,000 from $322,000 for the corresponding period in 1995.
These expenses decreased from 59% to 54% as a percentage of Translation Services
revenues. This decrease was primarily attributable to fluctuations in the number
and relative size of jobs being performed, as the gross margin varies with the
size of the job due to the fixed administrative tasks which still must be
performed.
Product development expenses, which consist of the current cost of
non-capitalizable development expenses, decreased 25% for the three months ended
September 30, 1996, to $347,000 from $465,000 for the corresponding period in
the prior year. For the nine months ended September 30, 1996, product
development expenses decreased 10% to $1,075,000 from $1,193,000 for the
corresponding period in the prior year. The decrease was a result of the
Company's completion of several new products resulting in reduced costs
associated with certain outside consultants who were assisting in the
development of those products.
Selling, marketing and other expenses, which include the costs of selling,
marketing, customer support, shipping and administration for product sales,
decreased 29%, or $856,000, to $2,093,000 for the three months ended September
30, 1996, from $2,949,000 for the corresponding period in 1995. For the nine
months ended September 30, 1996, selling, marketing and other expenses decreased
24%, or $1,937,000, to $6,079,000 from $8,016,000 for the corresponding period
in 1995. This decrease was primarily attributable to the decrease in revenues
along with the Company's increased focus of fiscal resources on more effective
promotion and advertising programs, particularly in print media and retail store
promotions. In addition, the Company was increasing its sales force and
instituting new incentive plans during the corresponding period in 1995 as it
was expanding internationally into Europe, Canada, Mexico and Latin America.
Other costs within this category, such as sales commissions, travel and other
similar costs, are generally related to revenues and decreased accordingly.
10
General and administrative expenses consist primarily of payroll and related
expenses, occupancy costs, travel and related expenses for senior management,
finance and accounting, legal and administration. For the three months ended
September 30, 1996, these expenses increased 15%, or $115,000, to $864,000 from
$749,000 for the corresponding period in the prior year. For the nine months
ended September 30, 1996, these expenses increased 11%, or $231,000, to
$2,405,000 from $2,174,000 for the corresponding period in the prior year. The
increases occurred in the areas of payroll, travel, professional fees, business
taxes and depreciation as a result of additional expenses incurred to support
the growth of the Company.
Interest expense was $16,000 for the three months ended September 30, 1996,
compared to interest income of $17,000 for the corresponding period in 1995. For
the nine months ended September 30, 1996, interest expense was $16,000 compared
to interest income of $101,000 for the corresponding period in 1995. This was
due to interest expense incurred as a result of draws on the Company's revolving
and equipment lines of credit. The previous interest income was attributable to
short-term investments made by the Company after receiving the proceeds of the
redemption of the warrants in May 1994.
Income Tax Expense
No provision for income taxes was required due to the Company's net operating
loss carryforwards. Approximately $7,444,000 of net operating loss ("NOL")
carryforwards existed at December 31, 1995. Accordingly, the NOL carryforwards
at September 30, 1996, are sufficient to cover any potential income tax expense
generated as a result of the earnings as reported.
Liquidity and Financial Resources
The Company anticipates that the net proceeds from the private placement in
October 1996, together with cash flow from operations, existing cash balances,
and periodic borrowings under the Company's bank line of credit will be adequate
to meet the Company's expected cash requirements through 1996. In addition, the
Company has received and is considering a number of offers for an equity
placement to raise up to $5,000,000 in additional capital to be used for the
funding of marketing and sales programs directed at the introduction of the
Company's new products. The Board of Directors has instructed the Executive
Committee and certain officers of the Company to investigate these various
financing options and make a recommendation for final selection.
While operating activities may provide cash in certain periods, to the extent
the Company experiences growth in the future, the company anticipates that its
operating and product development activities may use cash and, consequently,
such growth may require the Company to obtain additional sources of financing.
There can be no assurances that unforeseen events may not require more working
capital than the Company currently has at its disposal.
The Company has secured a $2,000,000 revolving short-term line of credit, a
$2,000,000 revolving intermediate line of credit and a $750,000 equipment line
of credit with First Union National Bank. As of September 30, 1996, there was a
$1,000,000 loan balance outstanding under the revolving intermediate line, which
is being used to bridge cash needs between maturity dates of its short-term
investments. The Company has borrowed $563,000 under the equipment line to pay
off prior financing of equipment purchases and to finance additional equipment
purchases.
Other than as discussed above, the Company is not aware of any known trends, or
uncertainties, that have had or are reasonably likely to have a material effect
on the Company's liquidity, capital resources or operations.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None.
b. Reports on Form 8-K
None.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
GLOBALINK, INC.
(Registrant)
Date: November 8, 1996 By: /s/Ronald W. Johnston
---------------- -------------------------------
Ronald W. Johnston
Chief Operating Officer
(Acting Chief Financial Officer)
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